Bper Banca SpA

MIL:BPE

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the BPER First Quarter 2020 Consolidated Results Conference call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Alessandro Vandelli, CEO of the BPER Group. Please go ahead, sir.

[Alessandro Vandelli, executive]

Good evening, ladies and gentlemen. Thank you all for joining this conference call today about our first quarter 2020 results. This is Alessandro Vandelli, CEO and I'm here with Roberto Ferrari, CFO; Alessandro Simonazzi, Head of Planning and Control; and Gilberto Borghi, Investor Relations Manager.

First of all, let me say that I hope you and your families have been keeping safe and healthy. I never thought that calls like this could open introducing something that will financial has nothing to do. Last time we did one of these calls was only a couple of months ago, but since then work now seems to be very different. Obviously, an event like the health emergency, we all are currently experiencing changed priorities and inevitably makes individuals and company focus on what is really important.

We, of course, have the responsibility to run the bank safely, taking care of our colleagues, helping our customers through their difficulties, supporting the domestic economy in the communities where we live and work. We have been able to do that because of the strength of our business model and the deep knowledge of our customer needs, as we are a national regional bank where the proximity to the customer is our daily job. And I have to say that I've been especially proud of the way all my colleagues across the group have faced the challenges of this extraordinary time, so I'd like to start this presentation today by taking few minutes to set out how we have been responding to the crisis.

We know that some customers are dealing with very hard times and financial challenges. We have moved quickly to give them the reassurance and the support they need. I'm going to give a brief summary and examples in the first page of the executive summary. Please go on Page 5 of the presentation, which is already available on our website. As I said, we immediately reached to face this unprecedented event, the health, economic and social emergency caused by the spread of COVID-19 virus with an incredible commitment to offer numerous initiatives in the areas where the group operates. Key priorities are to protect the health of our employees and customers and implement support measures for households, small businesses and companies, while ensuring operational continuity of corporate processes also by introducing innovative working methodologies.

Our operations have been highly resilient with around most of the branches open for business and, basically, all ATMs remained accessible. More than 50% of our staff working from home and a high degree of business continuity. We have increased our IT capacity to allow an increasing number of daily access to online channels, and we have also strengthened our contact center to manage a large number of incoming calls. This helped us to reach quickly and effectively in support of our customers. We have introduced a broad range of customer support measures and have followed very closely the evolution of all measures, the government and regulators have put in place. In summary, at group level, we have worked on different measures.

About moratorium on loans repayments for SMEs, we have had more than 75,000 requests to process. We have made available 2 new lines of credit at group level, the first for EUR 1 billion to provide liquidity to corporates, and the second for EUR 100 million to support private individuals and retail businesses.

Relatively to loans to SMEs and professional retail up to EUR 25,000, 100% guaranteed by Mediocredito Centrale, we are processing more than 17,000 requests for more than EUR 300 million. New lending granted by SACE, we have already signed the agreement for the provision of guarantees on loan exceeding EUR 25,000 and already set credit and IT infrastructures to provide financing.

We are also active on the social side as a natural extension of what we are already doing. We have approved donation of over EUR 3 million at group level to purchase intensive care equipment for health care facilities, to provide social welfare, to support health care and scientific research, to set up educational and teaching emergency remotely and other intervention in favor of our communities.

Now after this brief overview about the health emergency issues, we can turn to our fourth quarter 2020 performances. Please move on the next Page 6. We can say we had a good start of the year with satisfactory January and February and even the first part of March. This was a confirmation of the strategic value of the extraordinary operations completed during 2019. In fact, even in a context characterized forced by the slowdown of the economy, then by the effects of the health emergency, our group has shown a good ability to generate revenues.

Operating profitability, even the presence of a limited contribution from finance has touched EUR 600 million, then a tight cost control and an excellent levels of liquidity and capital solidity.

The net profit for the period, however, positive for EUR 6.1 million, is strongly affected by the accounting of additional loan loss provisions for approximately EUR 50 million, as the first significant intervention following the worsening of the macroeconomic context caused by the health emergency.

It's also worth mentioning that in the quarter, there's the accounting -- the ordinary contribution to the single European Resolution Fund for the full 2020 for EUR 32 million. In details, Q1 2020 net profit of EUR 6.1 million has been characterized mainly by resilient core revenues, down only by 0.5% quarter-on-quarter, showing an increase of NII by 1.8%, offset by a decrease of net commission by 3% quarter-on-quarter mainly due to the usual positive seasonality of the Q4, but broadly flat versus the third Q 2019 that is a more comparable quarter, a lower contribution from trading due to the high volatility on financial markets in the period, a reduction of operating cost by 4.4% quarter-on-quarter, net of relevant nonrecurring items in Q4 2019 and, finally, as we said before, additional loan loss provisions for about EUR 50 million. And therefore, the cost of credit at 110 basis points annualized and 2020 ordinary contribution to the European Single Resolution Fund for EUR 32 million.

Also this quarter, we confirm our very solid capital and liquidity position. We have been able, once more, to manage capital in a very effective way. And we continue to be very solid with its CET1 ratio fully loaded at 12.07% at the end of Q1 '20. CET1 phased in is at 13.6%, maintaining an appropriate buffer of EUR 1.8 billion over the minimum regulatory requirement set by ECB for 2020. In addition, our liquidity position is very strong as shown by LCR index at about 168%, and the liquidity buffer comes over EUR 11 billion.

Move on the next Page 7. Again, good news from asset quality standpoint. We had a reduction of the stock of gross and net nonperforming loans of 1.1% and 2.8%, respectively, since the end of 2018; a gross NPE ratio stable at 11.1% due to the decrease of loans; and the NPE coverage increased by 85 basis points to 51.9%, improving on all administrative strategies. We recorded a further decrease of default rate at 1.5% annualized from 1.7% in 2019.

Talking about business, net customer decreased by 1.9% since the beginning of the year, mainly attributable to the corporate segment and financial companies, while the retail sector has recorded substantial stability.

Total funding, which includes the bancassurance sectors, stood at EUR 165.6 billion, down by 5.6% from the end 2019, mainly due to the market effect relating to indirect deposit, both in asset under management and asset under custody. The origination of residential mortgages and consumer credit was positive, even not comparable with the same period of 2019, due to the change of the scope of consolidation.

Lastly, a final comment about the strategic operation we have in place. In this context, we -- of high uncertainty, we confirmed the strategic value of the project for the acquisition of a going concern from Intesa Group -- Sanpaolo Group, obviously, if the voluntary public exchange offer launched on the entire share capital of UBI will be a success. Activities for the execution of the agreement, both from the point of view of the authorization procedures and the operational ones, are going on, in line with the time line we had in mind. Just to remind you that on April 22, the EGM of BPER approved with a 97.11% of votes cast, the proposal to grant the Board of Directors the power to carry out a capital increase up to a maximum of EUR 1 billion in order to support the acquisition. As you know, this rights issue for which Unipol Group expressed the willingness to subscribe its pro-quota stake is assisted by a pre-underwriting agreement with Mediobanca.

Now let's go very quickly to the analysis of the Q1 results, starting from the balance sheet. We can move on to Page 9. So total funding, the value stock is EUR 165.6 billion in Q1 '20, including a contribution of asset under management from Arca Holding of EUR 15.5 billion. Stock shows a decline by 5.6% versus December '19 mainly due to indirect deposits decrease, strongly affected by market effect, related to financial markets turmoil following the health emergency crisis.

Reduction in total deposits of EUR 9.9 billion is for over 1/3 attributable to the Unipol Group, EUR 3.6 billion, while the rest is mainly concentrated on indirect deposit, EUR 5.5 billion, while direct funding is only marginally down by 1.6% since the end of 2019.

Let's turn to Page 10 just to see a few details about the breakdown of the direct funding. Direct customer deposits were down by EUR 0.8 billion or 1.4% since December 2019. The breakdown shows an increase in current account and sight deposit by 0.5% in the presence of a decrease of time deposit, CDs and bonds. The overall reduction is mainly concentrated in the corporate segment, while the retail one shows a small increase. Institutional funding at EUR 3.3 billion, down by 4% since December '19, mainly due to repos zeroing.

Looking at the institutional bonds maturity, maturities, both in 2020 and 2021, were have only EUR 0.9 billion expiring, of which EUR 750 million of a covered bond in 2020, giving a high degree of flexibility in our funding strategy going forward.

On Page 11, we can see the decline of indirect deposit stocks down by 7.6% versus December '19 at EUR 108.5 billion, both in asset under management and asset under custody, mainly due to significant impact of the market effect due to the financial market volatility following the health emergency.

On the other hand, we have also underlined a positive performance of the bancassurance sector, with an increase by 1% on December '19, despite the difficult business environment. This is an encouraging signal that the sector is active and supportive for business. Net inflows in asset under management and bancassurance positive, plus EUR 0.2 billion in the quarter, despite the turmoil in financial markets. In details, we have noted an overall positive trend in asset under management for the first 2 months of the quarter, then a sharp drop in March. In the bancassurance sector, we underlined growing net inflows in the quarter, in particularly for life insurance.

Moving on to Page 12. We recorded a decrease of loans, both at gross and net level, currently, respectively, at EUR 54.3 billion and EUR 51 billion. In particular, gross customer loans were down by EUR 1 billion since December '19 mainly due to corporate segment and financial companies, while retail sector recorded substantial stability.

In Q1 '20, residential mortgages origination has shown positive trend on a monthly basis, and consumer credit production was up by 21.7% versus Q1 2019, even though the comparable zone is not on a like-for-like basis. The good quality of the performing loans book is confirmed with a very low bucket of high-risk exposure, only 3.5% of the performing book. We can underline that gross NPE stock declined by 1.1% since December '19, thanks to internal workout and the higher recovery rate, in particular, on bad loans.

Let's turn to Page 13. Once again, we can confirm our asset quality improvement. Gross NPE stock decreased by 1.1% since December '19 in all its components, in particular, past due with a decline by 18.2%, mainly thanks to internal workout and recoveries on bad loans. Gross NPE ratio came broadly stable at 11.1% in Q1 '20 versus December '19 due to the decrease of loans, and the net NPE ratio went slightly down at 5.7% versus 5.8% in December '19. We have also underlined the NPE -- the net NPE coverage improved at 51.9% from 51% in December '19, and we can appreciate the remarkable increase in -- of UtP and past due coverage, respectively, at 34% and 18.4%. We reiterate our commitment to focus on further asset quality improvement going forward.

Moving on to Page 14. We can add another couple of positive marks of the asset quality. In particular, default rate improved further at 1.5% annualized compared to 1.7% in 2019, one of the lowest level in the history of our group signaling that a good job was done in the credit area in the past year. Consider that in 2016, the default rate was at 4.2%. We can also focus on the strong improvement of the bad loans recovery rate, which comes at 7.2% annualized compared to the 6.3% in 2019. This is once more a confirmation that our servicing platform, BPER Credit Management, is a very efficient platform. It is doing an excellent job and playing an important role within our overall NPE strategy.

Page 15, the securities portfolio reported an increase of EUR 0.9 billion. The strategy here has been to try to take advantage of widening spreads, both in the sovereign and the corporate bonds area. Italian government bond stock is still relatively low at EUR 6.6 billion, weighing 33.2% of the financial asset portfolio and 10.8% of the total asset. We continue to follow our strategy to diversify the financial portfolio and not to be too concentrated on the Italian sovereign risk. Total bond and Italian govies portfolios duration are broadly stable since December 2019, respectively, at 3 years and 4.3 years.

Now we can move on to the profit and loss figures on Page 17. A few comments here. Our group showed a good ability to generate revenues, operating profitability, even the presence of a limited contribution from finance almost reached EUR 600 million, despite a context characterized by the slowdown of the economy and the first effects of the health emergency.

Commenting the Q1 20 results, it's worth highlighting that the positive net profit for EUR 6.1 million was strongly affected by the accounting of additional loan loss provisions for approximately EUR 50 million, as the first significant intervention following the worsening of the macroeconomic context caused by the health emergency and the accounting of the ordinary contribution for the European Single Resolution Fund for EUR 32 million. It is clear that our ambition is to be more profitable, but the development of the macro, in light of the pandemic suggests us to be very conservative, while approaching the future worsening scenario. For this reason, we decided to record additional loan loss provision for EUR 15 million.

We can move on very quickly to Page 18. I'd like to advise you that while going into details of profit and loss figures, we must remember that the comparison between the first Q '20 and first Q '19 data is not on a like-for-like basis, so my comments will be focused when necessary on the quarter-on-quarter trends because only the Q1 -- Q4 '19 and the third Q '19 results can be comparable. We are very satisfied of net interest income. In fact, stated NII grew by 1.8% quarter-on-quarter at EUR 308 million, despite a difficult economic and financial environment. Ordinary NII net of IFRS 9 and IFRS 16 effects remained broadly stable in Q1 compared with Q4 2019. Some positive signals came mainly from the increasing penetration of consumer credit market, positive monitoring of business conditions and cost of funding improvements. NII resiliency is mainly explained by improvement of the spread, plus 8 basis points quarter-on-quarter, mainly thanks to the decrease of cost of funding and broadly stable asset yield. Given the current difficult macroeconomic scenario and the low negative interest rate environment, this can be considered a very positive result overall.

On Page 19, net commissions, I can say that, overall, we are in the presence of a positive performance in commissions. In Q1, net commission amounted to EUR 267.6 million, down 3% quarter-on-quarter, mainly due to credit cards payments hit by the prolonged lockdown, but broadly stable versus third Q '19, which can be considered a better comparable quarter. It's worth highlighting that we recorded a good performance in the net commission of asset under management and asset under custody sector, plus 5.6% quarter-on-quarter, while the bancassurance sector decreased mainly due to the positive seasonality of the last quarter of the year. The component referring to loans and guarantees showed a marginal decrease, minus 0.9%. Asset under management upfront fees amount to EUR 7 million in March '20 with a weight on total net commission, 2.6%, which is still in the low range compared to the average of the market.

On Page 20, in Q1, trading income was lower compared to the previous 2 quarters, strongly influenced by the turmoil on the financial market following the health emergency crisis.

Moving forward on Page 21. Operating cost amounted to EUR 411 million, down by 4.4% compared to the Q4 2019, calculated net of relevant nonrecurring items as reported in details on this slide and the call out on the right box of the slide. In detail, in the fourth quarter of the year, staff expenses amounted to EUR 255.6 million, substantially stable compared to the fourth quarter 2019 calculated net of nonrecurring charge relating to the redundancy plan of EUR 136 million. Other administrative expenses amounted to EUR 114.5 million, down 11.4% compared to the fourth quarter calculated net of certain cost related to the strategic operation for EUR 17.2 million.

D&A amounted to EUR 41 million, down by 8% compared to the fourth quarter of 2019 calculated net of nonrecurring charge relating to impairments on properties for EUR 31.8 million.

From Q2 onwards, we expect the first visible benefits from the redundancy plan, as a large number of employees left the bank on the end of March, and another sizable number will leave the coming quarters.

On Page 22, we recorded loan loss provisions of about EUR 140 million in Q1, including additional provision of EUR 50 million as we said before. Consequently, the annualized cost of credit rose to 110 basis points versus 86 basis points in 2019. This quarter, we have also accounted the ordinary contribution for the full year 2020 to the Single Resolution Fund for EUR 32 million.

About liquidity, on Page 24, we consider our liquidity position as very solid. Our total eligible assets increased at EUR 21.2 billion, along with the bucket of an encumbered eligible asset of EUR 9 billion, investor liquidity of EUR 2.4 billion made by deposits with the ECB. LCR is at about 168%, so well above the 100% threshold as well as the NSFR ratio stands well above the regulatory floor.

On Page 25, we report the evolution and the breakdown of our capital ratios. Our capital position is confirmed to be very solid with CET1 fully loaded at 12.07%, slight increase compared to 12.1% in December 2019, the main positive effect on CET1 ratio in the quarter being the 2019 dividend accrual nondistributed for 21 basis points and the reduction of the RWA worth 35 basis points, which includes the net impact of the extension of the AIRB model to the large corporate segment, the decline of loans and the TRIM exercise.

The main 2 negative effects come from the reserves for 31 basis points due to the turmoil on financial markets following the health emergency crisis, to be at last partially recover if markets will improve over the year; and the DTA and holdings deduction from capital for 15 basis point. We believe this is a good starting point to improve our capital position over the year as we have some extra buffers to exploit, as you know, like the AIRB model extension to the ex-Unipol perimeter and C.R. Saluzzo.

Now in conclusion, let me highlight briefly key messages on Page 27. So in summary, a good performance overall with a very prudent approach for the worsening of the macroeconomic scenario. Our business since now have proved fairly resilient. We have been able to react quickly to the emergency, granting operational stability, and our digital platform was supportive to provide the availability of a full range of customer services.

In addition, we can say that also our profit and loss figures have shown some degree of resiliency, as we highlighted in the operating income and operating cost side, for example. And moreover, we have already done a part of the job in terms of the cost of credit anticipating EUR 50 million of loans loss provisions, as the first significant intervention following the worsening of the macroeconomic context caused by the health emergency.

Our track record in improving asset quality continue to be very clear, and we are committed to improve further, despite the difficult economic environment. We continue to monitor the impact of the pandemic crisis and proactively taking action to support the business and to do our best to meet the needs of our customers in the present and in the future. We are ready to face this challenging time, thanks to our solid capital and liquidity position and our resilient ability to generate revenues.

On capital, in particular, our objective is to maintain a strong CET1 ratio fully loaded over the year, as we have some tailwinds to exploit like example -- for example, the AIRB model expansion to ex Unipol Bank and C.R. Saluzzo.

We also think that it's crucial to have already addressed many action of our business plan approved at the beginning of 2019. It will support our performances in this environment.

Thank you all for your time and attention. Now we are ready to start the Q&A session and take your questions. Thank you, thank you very much.

[Operator]

[Operator Instructions] The first question is from Christian Carrese with Intermonte.

[Christian Carrese, analyst]

I have few questions. The first one is on net interest income. If you can provide us what should be the evolution of the IFRS 9 component in the coming quarters. And still on net interest income, the current TLTRO take up EUR 9.7 billion. Do you expect to roll over that amount to TLTRO-III? If you can tell us what is the maximum take up for TLTRO-III. And what could be the positive impact in terms of net interest income --

Second question is on cost, the EUR 411 million cost over the first quarter. I presume this number could go down due to the exit at the end of the quarter and the coming quarters. If you can elaborate a little bit on that. So question on total assets and capital, I'll say, the positive -- if you can tell us the positive -- the reserve on -- as to maturity category as of first quarter or up to the -- up to now and the sensitivity to FVOCI to the BTP bond spread

And finally, on capital, if you can provide us the common equity Tier 1 fully phased net of DTA absorption and if you can give us an idea of the potential positive impact from the extension of internal model to Unipol Banca and C. R. Saluzzo.

[Alessandro Vandelli, executive]

Okay. Thank you very much, Christian. So many questions. I would like, first of all, to explain something about the NII evolution to give some element to appreciate what we expect to see in the coming quarters. I think that we are absolutely confident on the positive trend on NII. The starting point Q1 2020 was, in our view, extremely positive, but we estimate an important contribution coming from the cost of funding and the TLTRO for the next quarter, so probably, what we estimate at the end of the 2019 for the full year in 2020. Now probably, we have a better NII than expected. So in our view, this will be crucial to offset some pressure on the commission and fees side.

On the TLTRO, we have a potential amount TLTRO-III of EUR 16.7 billion. We haven't still decided what will be the final amount, but we see the trend on customer loans to decide at the end what will be the size of TLTRO. But we are confident that this will be an important contribution to our NII trend.

I would like to say also something about the impact on our capital position coming from Unipol Banca and C.R. Saluzzo. We expect to have a reduction in RWA of EUR 1.35 billion, so EUR 1.35 billion and so roughly a benefit of 40 basis points in CET1 ratio. I don't know Roberto, our CFO, if you will complete something about the question of Christian.

[Roberto Ferrari, executive]

Christian, just 2 facts. On the NII, actually, we will have an important contribution from tiering, from the increase of the financial portfolio and from the participation to the TLTRO-III and actually also a positive one from the funding in dollars -- U.S. dollars through the ECB auction. So actually, we do expect a very positive contribution of those 4 factors compared to 2019. Actually, what we are looking at is 2020 compared to 2019.

The held-to-maturity reserve was negative for EUR 30 million at the end of March. You asked the DTA absorption on capital. It is around 30 basis points on the fully phased. And the impact on fair value other comprehensive impact for 10 basis points of rate increase in BTPs is very low. It is only EUR 2.5 million because, actually, on fair value other comprehensive income, we have a very small amount of BTPs that is lower than 400 basis points -- EUR 400 million, sorry.

[Alessandro Vandelli, executive]

I would like to take also your question on costs. First of all, this 4Q was positive from this point of view. When I said before that in our view to have completed many actions during 2019 and take advantage of the approval of business spend at the beginning of '19, one of these is on the cost side because you know that the cost of the redundancy plan was completely on the 2019 figures and the benefit this year. And we expect an important improvement in the cost of staff. To give you an idea, in March, left the group, 280 people, and the benefit of this will be in the second quarter. But we expect a trend -- a similar trend also in the coming quarters. So the full effect of the redundancy plan will be spread during 2020 and partially also in 2021. So I think that the benefit will be absolutely positive from this point of view.

[Operator]

The next question is from Andrea Vercellone with Exane.

[Andrea Vercellone, analyst]

Three questions on my side. The first one is in relation to the capital increase associated to the acquisition of a bit of UBI. In the previous conference call, you had guided us to EUR 750 million, EUR 800 million. Since the terms of the transaction have changed, improved for you since and since share prices keep going down, I was just wondering whether you can give us an updated figure of what you have currently in mind as of now.

Second question is on the planned EUR 1.2 billion, if I'm not mistaken, GACS transaction, which you were planning to close in H1 this year. I would like to have an update on that, not so much on the timing, but on the feasibility of such transaction given that things have changed a bit.

And finally, if you are already in a position to give us an idea of what cost of risk should we be looking for 2020, maybe a range, if you don't have that precise number in mind yet.

[Alessandro Vandelli, executive]

Thank you very much, Andrea, for your question. The first one on capital increase, obviously, you know that we renegotiate the agreement. We have Intesa Sanpaolo and that renegotiation gave a flexibility on the price of this acquisition. And obviously, there is an impact on the size of the capital increase. What we can say is that in the current situation, the size of the capital increase will be more roughly around EUR 500 million at this stage. So this is the estimate that we can have in this market situation.

About the second question, if I remember correctly, was about the securitization of bad loans. We are fully committed on this, and we have already completed a first part of the job because the perimeter of the portfolio is completed is a perimeter of EUR 1.2 billion. The cutoff date was September 19, and we have already completed the business plan with the servicer. And we expect to have a clear view of the transaction by the end of May because we have already started the discussion with the rating agencies. What is important looking at the business plan is that we have a very prudent coverage on this portion of portfolio, so we don't estimate any impact on profit and loss in the disposal of the portfolio to the vehicle. We see what will be the tranching after the discussion with rating agencies. So I hope to have a clear view by the end of May. It will complete the disposal to the vehicle at the beginning of June. Looking at the market, it's not simple to say -- to add something. What I can say that probably there is still appetite for this class of asset, but probably with different price compared with one year ago.

The last question about cost of risk, for this year, at the beginning of 2020, we estimated a cost of risk around 70 basis points. At this stage, our idea is that for the year will be around 100 basis points of cost of risk.

[Operator]

The next question is from Giovanni Razzoli with Equita.

[Giovanni Razzoli, analyst]

[indiscernible]

[Alessandro Vandelli, executive]

Giovanni, we are not able to catch your voice. There's something disturbing.

[Giovanni Razzoli, analyst]

Can you hear me now?

[Alessandro Vandelli, executive]

A bit better, but there's something on the line that is disturbing the line. Are you able to do…

[Giovanni Razzoli, analyst]

If you can hear me, I can repeat the question then.

[Alessandro Vandelli, executive]

A bit, yes. A bit better. Try to go.

[Giovanni Razzoli, analyst]

Okay. I'm sorry. Otherwise, I will follow up later offline. The first question is, can you share with us what is the implications for the moratorium in euro million? I think you have provided us a number of accounts that they can apply. I was more interested to know what is the amount in euro million. And the same question for the request of active loans with the state guarantee with SACE. What is, as of today, the amount in euro million, if you declared the amount?

And the second question, if you get it, you've mentioned that you expect some pressure on the fees, I think, as related to the lockdown and not to the particular issues in terms of competition. Is that correct?

[Alessandro Vandelli, executive]

So I'll try to give you, first of all, what I catch of your question. First of all, on moratoria, to give you our update at the end of April. The number of requested was 83,000 for a debt -- residual debt around EUR 8.8 billion and the installment was around EUR 1.1 billion. So this is about the moratoria.

I don't catch the second question. Yes. Well, on the 4Q, the trend of fees was absolutely positive. And yes, there was something on payment, probably only on the last part of the quarter, let's say, only 2 weeks of March, so it's very difficult to say what is the impact of the lockdown. Obviously, what we can say is that April, in general, we see the first 2 weeks and the second 2 weeks of March, really, a very strong -- a very low level of activities for all the group. In the second half of April, something better. For give you an idea, some improvement in different areas, more activities, obviously very low compared with January and February, but something better. What is important from our point of view is to understand that now in May, what is the improvement on the activity. So probably, the worst period was between the second half of March, the fourth half of April. And now we'll see.

At the end about commission and fees, as I said before, my opinion is that at the end, the top line on profit and loss, thanks to a very positive trend that we expect on NII would be absolutely in line with the expectation that we had in mind at the beginning of the year. So better on NII, probably offset the impact on commission and fees.

[Operator]

The next question is from Adele Palama with UBS.

[Adele Palama, analyst]

So I have 3 questions. One, if you can tell us -- sorry, I mean, I think it's been already asked, but if you can tell us again all the moving parts for the CET1 in 2020 and in 2021 and if you can tell us also the expectation of the impact on the anticipation of the capital benefits from the CRR, so a significant impact in IT intangibles. Then if you can tell us the tax rate guidance for '20 and '21. And then also on the guarantees, I would like to know how much you expected the back book to be rolled into loan with guarantees.

[Alessandro Vandelli, executive]

So first of all, if I understand correctly about the CET1 ratio, what I can say is the impact coming from the supporting factor, we estimate EUR 0.5 billion of impact on RWA. And as I said before, looking at the full 2020, the benefit coming from Unipol perimeter with the alignment on the DIB and the same for Saluzzo and together are something roughly EUR 1.35 billion of RWA. For this reason, so the target for this year is to be well below -- well above 12.5% of common equity Tier 1. I don't know, Roberto, if you want to add something moving parts on the NII. This is for 2020, and this is obviously the main effect of this year.

It's difficult right now to estimate the portion of our loan book covered by the guarantee by the government. Frankly speaking, it's too early. What I can say that there is a significant -- obviously, significant interest by the clients, so we are dealing with an important number of clients. As I said before, the first step was moratorium, and the side of moratorium is really impressive. And what we can say is that the effect of moratorium and also of the state guarantee will be on the asset quality, so this is extremely important and the cost of risk.

I don't know if you want to say -- to add something to -- and I'm ready to try to give you the best answer that I can.

[Adele Palama, analyst]

Okay. And the other question is on tax rate, is the guidance for this year, next year.

[Alessandro Vandelli, executive]

Yes, yes. So for the tax rate, our expectation for the year is not simple because, also in this, there are some elements coming from the government decree. Anyway, we expect a low tax rate. This is what I can say a significant -- a very low tax rate. I don't want to say something, but there are so many moving parts. And I don't want to express a number, but expectation is for a low tax rate.

[Operator]

The next question is from Hugo Cruz with KBW.

[Hugo Cruz, analyst]

A lot of questions have been asked. I just wanted to ask a bit more around the guidance on the cost of risk. You gave 100 basis points, but can you give us kind of what range of macro assumptions you are taking -- you're assuming here, for example? Or any sensitivity around any macro variables would be very helpful.

[Alessandro Vandelli, executive]

Thank you for your question. Not simple to answer to your question because the problem today is not only to have a clear view of the GDP for 2020 and also for 2021. And you know, if you try to have an idea, there are so many different estimates for the year, and it's so difficult to say something. But at the same time, at this stage, it's also really very difficult to understand the impact of the many action of the government to support liquidity to entrepreneurs and companies. So till now, we work, as we say, a top-down approach. So having in mind what is the cost of risk in the normal situation of this year, so at this stage, we estimate a significant add-on, EUR 50 million. And probably, it's possible to have a better view only in the second half of the year where we try to apply some scenario and take into consideration. The support of the government at this stage, let's say, is something we feel prudent, also try to benchmarking with some other intervention in other banking groups. But as I said, it's only a first step, in our view, significant. And probably on June, we have a better view for a complete estimate.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions.

Excuse me, there is a question from Jean Neuez from Goldman Sachs.

[Jean-Francois Neuez, analyst]

So I just wanted to ask a clarification on your last answer on the guidance on cost of risk and your assumptions. I might have misunderstood, but I understood in your answer that you said that your guidance was relatively important, but based on the benchmarking with other banking groups. Is that right? Did I understand that correctly?

[Alessandro Vandelli, executive]

I'll try to explain, first of all, the approach of this quarter. This quarter, we have, first of all, estimate of the cost of risk without considering any impact coming from the emergency, and this was a cost of risk around 80, 85 basis points. Then we estimate an add-on on this level, and so the EUR 50 million that we booked in this quarter. And as I said before, it's not an application of a scenario, but it was a top-down estimate for the first quarter. So as we say -- as I said before, it's a first intervention in this area.

Speaking about the guidelines, let me say that we expect, for the year, a cost of risk in 100 basis points of cost. And what I tried to explain is that, in the second quarter, probably it's possible to have a better view, first of all, because probably the forecast on GDP will more stable than today. Today, there are so many different estimates, so it's so difficult to apply a single scenario and also to have more clear the effect of the government intervention to reduce the cost of risk and also the moving part of the credits from one categories and the other. So for this element, this is only the first important intervention, and we'll see on the second. As I said that we want to see also the other banking group what will be at the end of the first Q only to benchmark, what is the approach. But our approach is, at this stage, add-on top-down, something more precise to see in the second Q after probably a stabilization of the forecast of GDP and the intervention of the government.

[Operator]

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

[Alessandro Vandelli, executive]

Okay. So thank you, thank you very much for your attention. Have a good evening, and we see you on the next conference call. Thank you, thank you very much.

[Operator]

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