Bper Banca SpA
MIL:BPE

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Earnings Call Analysis

Q1-2024 Analysis
Bper Banca SpA

BPER's Strong Financial Q1 2024 Results

BPER delivered a strong first quarter of 2024 with over EUR 300 million in recurring net profit and a return on tangible equity of 14.4%. Revenue growth was 2% year-on-year, with improved cost efficiency reflected in a cost-to-income ratio of 51.7%. Risk management metrics showed a net non-performing exposures (NPE) ratio of 1.2%. The bank's capital strength was emphasized by a CET1 ratio of 14.9%, and liquidity remained robust. Despite challenging economic conditions, BPER remains optimistic, sustaining goals ahead of the 2022-2025 plan. Full-year guidance for 2024 expects stable recurring net profit in line with 2023, maintaining strong profitability through strategic adjustments.

Introduction by the New CEO

Gianni Giacomo Pope, the newly appointed CEO, opened the earnings call by expressing his gratitude towards the Board and previous management. He highlighted the strengths of the company, particularly its widespread presence and professional staff, which he sees as key assets for building quality customer relationships and creating stakeholder value. Pope expressed satisfaction with the bank's positive results and confirmed that they continue to exceed the aspirations set by the 2022-2025 plan.

Financial Performance Overview

The bank achieved over EUR 300 million in recurring net profit for the first quarter of 2024, reflecting a Return on Tangible Equity (ROT) of 14.4%. Revenues grew by 2% year-on-year, and the cost-to-income ratio improved to 51.7%. The net non-performing exposures (NPE) ratio stood at 1.2%, with a total NPE coverage of over 54%. The annualized cost of credit decreased to 43 basis points from 48 basis points at the end of 2023, indicating effective risk management.

Capital and Liquidity

The bank's capital and liquidity profiles remain robust, with a Common Equity Tier 1 (CET1) ratio of 14.9%. Liquidity ratios also exceeded the regulatory minimums, even after repaying EUR 1.7 billion of the last TLTRO tranche. The Liquidity Coverage Ratio (LCR) was 162%, and the Net Stable Funding Ratio (NSFR) stood at 133%, both indicators of solid liquidity positions.

Revenue and Cost Details

Operating costs for Q1 2024 were EUR 701 million, compared to EUR 675.8 million in the same period last year. Staff costs increased due to the renewal of the national collective labor agreement and inflationary pressures, while other administrative expenses rose due to ongoing investments in new technological platforms and digitalization. The bank's cost structure saw improvements with the total headcount decreasing by 707 employees year-on-year and by 374 since December 2023.

Asset Quality and Loan Performance

Credit quality remained high with an NPE ratio of 2.6% gross and 1.2% net. Total nonperforming loan coverage rose to 54.2%. The loan book's coverage ratio for performing loans remained stable at 0.73%. Additionally, the quarter saw no significant inflows of new NPEs, reflecting prudent credit management practices.

Guidance for 2024

For the full year 2024, the bank expects a slight decrease in net interest income due to a potential narrower banking spread from a less restrictive monetary policy. However, they anticipate positive dynamics in net commission income driven by growing revenues from asset management and advisory services. Operating costs are projected to be in line with 2023, incorporating the full impact of the labor agreement renewal. Overall, the recurring net profit for 2024 is expected to be in line with 2023.

Key Strategic Focus Areas

Looking ahead, the bank aims to focus on increasing structural productivity and modernizing its operations. One significant area of growth potential identified by CEO Gianni Giacomo Pope is in commission fees, especially from asset management. The bank is also concentrating on expanding its private banking and wealth management services through Banca Cesare Ponti, expecting this specialization to yield both higher fees and better representation of business unit values.

Investor Relations and Conclusion

The bank remains committed to properly remunerating shareholders, having accrued EUR 0.16 as a dividend for the first quarter. The bank's leadership is confident in the resilience and strength of their financial and operational positions, allowing them to navigate future uncertainties while focusing on growth and efficiency improvements.

Earnings Call Transcript

Earnings Call Transcript
2024-Q1

from 0
Operator

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the BPER First Quarter 2024 Consolidated Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Nicola Sponghi, Investor Relations Operations of BPER. Mr. Sponghi, please go ahead.

N
Nicola Sponghi
executive

Thank you. Good evening, everyone. Thank you for joining our first quarter 2024 results conference call. Before I give the floor to the CEO, Gianni Giacomo Pope; and the CFO, Gian Luca Santi, for their financial result presentation, please note that our slide set and press release can be found on our corporate website. Please remember that the Q&A session is reserved for financial analysts, whom I kindly request to only ask 2 questions so we can get around to everyone in due time. Thank you very much. Mr. Pope, please, you have the floor.

G
Gianni Giacomo Pope
executive

Thank you. Good evening. Welcome, and thank you for being with us today. I'm pleased to open this call as the group new CEO. Let me first express my gratitude to the Board for the trust they placed by appointing me to lead this extraordinary company for the next 3 years. And let me thank the former CEO and all my colleagues for their outstanding work and for leaving the company stronger and more performing than ever. Despite my 40 years of professional experience, I see this as a very special challenge which I'm embracing with particular excitement. After just a few days since my appointment, I'm quite impressed by the quality of this institution, its people, and its clients.

Our presence across the country, combined with the professionality of our people, is undoubtedly our main assets that enables us to build quality customer relationships and create value over time for all our stakeholders. This is why I wanted to spend my first day as CEO with our commercial network that will be central for achieving the future ambitions of the bank.

We are today presenting the results for the first quarter of 2024. Before I leave the floor to Gian Luca Santi, Group CFO, who will walk you through the details, I would like to express my satisfaction for the positive results achieved by the bank in the continuity with the last quarter's performance and above the aspiration set by the 2022-2025 plan. If you turn to Slide 4. In this first quarter, we delivered over EUR 300 million in recurring net profit with an ROT of 14.4%. Positive progress have been made across all the most relevant KPIs.

We have grown our revenues by 2% year-on-year, improved efficiency with cost to income of 51.7%, and continued positive risk management with a net NPE ratio of 1.2% and a total NPE coverage of over 54% with annualized cost of credit standing now at 43 basis points, down from 48 basis points registered at the end of 2023.

The bank's capital and liquidity profiles remain strong, thanks to the organic generation of capital, which drives the CET1 ratio to 14.9%. The same applies to the bank's liquidity position with regulatory ratios being broadly in excess of the minimum thresholds required even after the EUR 1.7 billion repayment of the last TLTRO tranche. Despite a very uncertain and volatile geopolitical and macro scenario, our balance sheet is solid and resilient and allows us to look into the future with positivity and confidence and to sustain the future growth.

Results of the last years are certainly impressive. And despite the interest rate scenario will most likely become challenging, I'm profoundly convinced that even greater potential is ahead of us, in particular, in terms of growth from commission fees and of a structural productivity increase and modernization of the operating machine. We will continue to work on ensuring that the group is on the virtuous path. Thank you for your attention, and I will now give the floor to Gian Luca Santi for the rest of the presentation, and we'll, of course, take your questions in the final Q&A session. Please, Gian Luca.

G
Gian Luca Santi
executive

Thank you, Gianni. Good evening, everybody. Let me now walk you through the details of the presentation. On Slide 6, we can see that total funding amounts to around EUR 298 billion, up 2.7% year-to-date, driven in particular by the positive trend in indirect funding. Direct deposits from customers rose to EUR 118.1 billion, down 0.6% since the end of 2023. Retail direct funding continues to prove resilient and accounts for around 70% of total funding, while corporate funding accounts for almost 30% of the [ 2 ].

Among the main drivers which partially offset the decline in current accounts quarter-on-quarter, minus EUR 2.1 billion was the good performance of time deposit, certificates, and bonds, plus EUR 1.1 billion. With regard to indirect funding, the aggregate amounts to EUR 180 billion, plus 4.9% since end of 2023. The aggregate includes asset under management and life insurance rising to EUR 88.6 billion, up 2.7% on end 2023, whereas asset under custody amount to EUR 91.4 billion, up 7.3%, including on the back of BTP government bonds underwritten between February and March for an amount of EUR 0.9 billion.

Particular, the latest quarter showed a remarkable performance in funds, thanks to easy targeted products designed to intercept on-demand funding potentially migrating to BTPs. Strong asset under management net inflows, EUR 351 million in the first quarter '24 versus EUR 253 million in the first quarter '23. With regard to loans, Slide 7 highlights that our stock of loans to customers amount to EUR 87.7 billion, down 0.6% since end 2023. The reduction is primarily traceable to the decline in loans originated by product factories, in particular, factoring. As again, the positive performance of loans to retail customers, plus EUR 0.1 billion. A down trend was observed in the corporate segment, especially in the manufacturing, minus EUR 0.2 billion, and the wholesale and retail trade services, minus EUR 0.2 billion.

From a sectoral perspective, the loan mix sees the main economic sectors represented with a balanced distribution across the manufacturing and trade sectors, accounting, respectively, for about 15% and 8% of the total. The breakdown of customers by segment sees the retail segment accounts for 60% of customers volumes, while corporate customers account for 40% of the 2. An improvement is observed in the loan-to-deposit ratio, which has decreased both Q-on-Q and year-on-year, settling at 74.3%.

Moving on to asset quality, Slide 8. As you know, the quality of loan book continues to be one of our focal points. In the first quarter of 2024, credit management continued to follow a disciplined approach, which will allow the bank to be in the best condition possible should the economic cycle deteriorate in the future. This slide shows our excellent credit quality with an NPE ratio of 2.6% growth and 1.2% net versus 2.4% and 1.2% at the end of '23, which enables us to continue being among the best-in-class in both the Italian and European banking system. Total nonperforming loan coverage rose to 54.2% versus 52.5% at the end of '23. Performing loan coverage settled at 0.73%, broadly in line with the level of end '23.

And stage 2 loan coverage is 5%, in line with the end of '23. First quarter nonperforming loan coverage rose 1.7 percentage points in spite of the increase in gross book value observed in all category of NPL. Performing loans are stable, both in terms of book value and coverage level.

Turning now to the securities portfolio on Slide 9. We point out that the financial assets totaled EUR 26.5 billion on a downturn compared to December '23. Within the aggregate, debt securities amount to EUR 24.5 billion, 92.4% of the total portfolio with duration of 2 years net of hedging and include EUR 12.9 billion worth of bonds issued by government and other public entities, including EUR 8.7 billion of Italian government bonds, down 15.3% since end 2023. Italian bonds account for around 44.7% of total bonds held in the portfolio and 7.8% of total assets. The quarterly annualized average yield on the portfolio was 2.7%. The securities portfolio duration was extended to 2 years as well as the government bond portfolio duration, which was extended to 2.4 years.

Moving on to commenting Slide 11. I would point out that the only nonrecurring item in the quarter consisting gains on the disposal of the shareholding in the UTP bad loan servicing platform to Gardant. In particular, the transaction recently completed between BPER Group and the Gardant Group generated a total capital gain of EUR 150 million before tax. In the next pages, we will expand on the details of the profit and loss.

Turning now to the net interest income, Slide 12. It totaled EUR 843.6 million, a 6.2% increase on the first quarter of 2023, mainly on the back of the commercial spread stemming from the interest rate environment, well managed deposit pass-through and positive contribution from the investment portfolio. Compared to the previous quarter, a decrease was observed in the net interest income in Q1 primarily as a consequence of the major reduction in the securities portfolio, minus EUR 36 million, due to the decline in volumes, minus EUR 1.8 billion and interest rate, minus 0.31 percentage points.

We will now move on to Slide 13 on the net commission income, which amounts to EUR 510.4 million, up 0.8% on the same period last year. In particular, commissions on traditional banking amounted to EUR 284.6 million, minus 2.9% year-on-year. Fees and commissions on indirect deposits settled at EUR 173.3 million, plus 10.3% year-on-year, and bank insurance commissions totaled EUR 52.4 million, minus 6.1% year-on-year. Again, as compared to March '23, I will point out the growth in assets under management, which benefits from upfront fees, plus EUR 6.3 million, whereas placement of the BTP Valore Italian government bond contributed EUR 4.7 million. Please note that the Q4 '23 result was affected in the bank insurance segment by the annual commissions bonus for reaching the target around EUR 22.7 million.

Operating cost, Slide 14, amounted to EUR 701 million as a gain, EUR 675.8 million for the same period last year. In particular, staff costs totaled EUR 437.7 million as compared to EUR 429.2 million for the first quarter of '23. The increase is mainly traceable to higher charges from the renewal of the national collective labor agreement signed at the end of last year. Other administrative expenses amounted EUR 200.2 million as against EUR 189.5 million in the first quarter '23, particularly as a result of the current inflation trend. D&A amounted to EUR 63 million versus EUR 57.2 million in the first quarter '23. The D&A increase is the result of the investments made under the business plan in the recent year with special reference with the new technological platforms and the progress in the bank's digitalization.

Branches in the first quarter totaled 1,635, stable since the end of the previous quarter and they were down by 124 units year-on-year. The group's total headcount was 90,850 in March '24, down by over 707 as compared to the same period last year and down by about 374 employees on December '23, including as a result of the Workforce Optimization Maneuver. Cost to income ratio for the quarter was 51.7%, substantially below the recurring cost-to-income ratio recorded in the fourth quarter '23, 53.4%.

Slide 15, again that credit quality continues to be among the best in class, with the NPE ratio settling at 2.6% gross and 1.2% net. And the coverage ratio for total nonperforming loans at over 54%. It's noted that the annualized cost of credit stands at 43 basis points. The trend shows a decline from the cost of credit registered both at the end of '23 and the end of '22, 64 basis points in '22. The loan book features a low rate of NPE inflows and high coverage level.

Moving on to liquidity. Let me point out that the bank's liquidity ratio remained high with an LCR of 162% as at March '24, even after EUR 1.7 billion repayment of the last TLTRO price at the end of March, whereas the NSFR amounts to 133%. I think very strong indicator of the liquidity of the bank. Slide 18, in terms of capital, the significant organic generation further reinforces our capital spend with a CET1 ratio of 14.9%. I would now give the floor back to our CEO, Mr. Pope, the final section of the presentation.

G
Gianni Giacomo Pope
executive

Thank you, Gian Luca. So inasmuch as financial year '24 guidance, we confirm the guidance disclosed in early February. Guidance for financial year '24 is confirmed with a slight decrease in net interest income as a result of a potential narrower banking spread due to a less restrictive monetary policy, positive dynamics in net commission income on the back of growing revenues from asset management and advisory services, operating costs in line with 2023, with additional inclusion of the full effect from the renewal of the national labor agreement for the financial sector.

On the asset quality front, the expectation is that sound coverage level and a conservative provisioning approach will be maintained with a stable cost of credit with respect to 2023. 2024 recurring net profit is expected to be in line with '23 recurring net profit. Thank you for listening to the highlights of our presentation. I would like to now open the Q&A session, please.

Operator

[Operator Instructions] The first question is from Giovanni Razzoli of Deutsche Bank.

G
Giovanni Razzoli
analyst

Welcome to the new CEO. I have 2 sets of questions. The first one is very simple. I was wondering if you can share with us what will be the time line, if any, for the update on the business plan? The second question is instead on the capital position. I've seen that your capital is evolving very well, 14.9%, including the accrual of the profit, but we are still guiding at 14.5% at year-end. So I'm wondering why do you expect such a contraction from here up until December. If you can update us with the regulatory wins, if any, that we expect for 2024 and the impact on Basel IV.

And related to this, I'm also wondering whether you can share with us if there is an impact from the rolling of the state-guaranteed loans on your CET1 ratio. And finally, I've seen that you've mentioned a reduction in the contribution of Superbonus on NII this quarter. I was wondering, it does not apply specifically to BPER but I should have raised this question to all the banks in Italy. Is there any risk that banks which have on balance the tax credit of the Superbonus may record some write-off if the government decides to extend the duration of this asset class. My first own perception is that this should not be the case if you already own these assets, but I would like to share -- to see your opinion on this.

G
Gianni Giacomo Pope
executive

Thank you, Mr. Razzoli. I'll take the first question and Gian Luca, the other 2. So inasmuch as the time line for a new business plan, well, now we're saying the current plan in 2025, we are perfectly aware that the bank is well ahead of its plan. And therefore, we are evaluating the option to possibly update it or revise it. So we will let you know as soon as we have decided what to do. Gian Luca?

G
Gian Luca Santi
executive

Too much question, Giovanni. About capital position, evolution of Basel II -- Base IV, sorry. For 2025, our expectation is between 40 and 50 basis points. No other effect in '24 from regulatory situation. About Superbonus, clearly, we have to wait for the real disclosure about the new rules. But if something changed, the duration from 4 to 10, you have to split in 10 years and not in 4 the effect of the -- this is the data between the -- okay, the real value and the acquisition value of the loss.

But the difference in our opinion is only the split during this year. If it becomes from 4 to 10, clearly, you can have 40% of the impact and not the total impacting that we estimate for, I don't know, '24. About loans, guaranteed loans, we are of around EUR 11 billion in this moment. No particular situation about these loans. We have the 85% of coverage linked to the government guarantee. And for prudence, we put also another 1%, but we didn't have until now any situation of nonperforming coming from this kind of loans. I don't know if I answered all?

G
Giovanni Razzoli
analyst

Yes. So Luca, if you can clarify the guidance on the CET1 at year-end, 14.5% and why you do see a contraction from the current levels of 14.9%. And if I may, specifically on the Superbonus, we have the [ first ] bank who are asking this question, can you share with us, are you in a condition to share with us what would be the impact on your balance sheet in case there is this expansion?

G
Gian Luca Santi
executive

Guidance about CET1, I said that we do not expect for the rest of the year some regulatory impact. Doesn't mean that we will have only the effect linked to the organic generation of profit. About -- as the CEO said about the next strategy of our capital, clearly, we are working on the option for the update or revision of something different about the industrial plan.

Superbonus. Clearly, if you consider, I don't know -- if we consider the 2023 and we had EUR 180 million of impact, you can have the -- not the total impact of EUR 180 million but you have the 40% of this impact. I think that this is the roughly calculation about the impact on net interest margin.

Operator

The next question is from Andrea Lisi of Equita.

A
Andrea Lisi
analyst

The first one is on NII. In particular, if you can update us on the strategy to protect NII in the face of recurring rates and, in particular, on replicating portfolio and on the strategy regarding the financial portfolio, which decreased by EUR 2 billion quarter-on-quarter. So what should we expect here?

And the second question is on cost. BPER continues to be the bank with one of the highest cost to income among listed Italian banks. So just wondering to understand if there is room for further efficiencies on the cost side, so just to have an update on this.

G
Gian Luca Santi
executive

About NII strategy. If you analyze the figures, we have betas on deposit that is the same in the first quarter '24, the betas that we had in the fourth quarter of '23. Clearly, our action during the first quarter was to increase the position hedged. We had, if you remember, EUR 12 billion at the end of the year. We now have EUR 14 billion. We think that we had an estimate of decrease of interest rate in the second part of the year, and we will continue to improve our capacity to manage this decrease.

To give you an idea, the sensitivity on the -- our net interest margin observed, okay, we have the stated that is around EUR 30 million, EUR 40 million in the first quarter. The observed is around EUR 150 million. But our internal model, the model that we use in our financial department, they show an effect for a decrease of 100 basis points of around EUR 50 million for the first quarter '24. This represents, in my opinion, a strong repos of hedging and a real example that we can manage the decrease of interest rate in the second part of the year.

G
Gianni Giacomo Pope
executive

Yes. For cost, I take the question. Yes, we do have costs that are quite high in the system compared to other competitors. On the other hand, you have realized that we have reduced quite substantially the cost to income ratio, improved the cost to income ratio quite substantially. As I mentioned in the beginning, I do see the possibility of increasing the structural productivity and modernizing even more the operating machine.

We do have -- we will have a reduction in cost because, as you know, we had a scheme, a redundancy scheme that was signed last year in December of last year for the exit of 1,000 colleagues. We have quite a large number of colleagues that will be leaving the bank by year-end. A small portion will be leaving the bank by the first quarter of 2025. And we do expect on this front to have an overall positive effect in the region of around EUR 50 million by the end of 2025. So this, together with the reassessment of the other administrative costs that we started, will further bring down, we do believe, will further bring down and improve the cost-to-income ratio.

Operator

The next question is from Marco Nicolai of Jefferies.

M
Marco Nicolai
analyst

Congrats to Mr. Pope for the new role. My first question for you, so what are the areas, in your view, where the bank should focus on going forward? I appreciate you're working on the plan. So I'm asking you any details, but high level, you mentioned during the introductory stage, commission income, also efficiency. And maybe there is something else also on shareholder distributions. In general, what are -- what do you think the bank should work on over the next years?

Second question, how do you see the balance between lower NII and higher commission income during 2024 and 2025? So I'm asking about, let's say, where do you see the revenues going, considering maybe the headwinds for NII and tailwinds for commission income. And just another follow-up on the Superbonus. So you said EUR 180 million in 2023. So if they apply, let's say, this change as we read on the papers, so shall we assume that in '24, you get essentially a negative of 60% of EUR 180 million, and that's the only impact you expect if essentially everything ends up like being -- like reading the papers.

G
Gianni Giacomo Pope
executive

I'll take the first 2 questions. So I didn't say that I'm working on a new business plan. I just mentioned that considering the fact that the bank is ahead of the plan, that was -- that is the current plan, we are evaluating the option to possibly update it or revise it. In terms of going forward, we do believe and we are working. We have been looking at this and envisaging 3 cuts in interest rates during the year of 25 basis points each, so for a total of 75 basis points this year.

So this obviously will have an impact on, although a limited impact, on the net interest income. We are pushing, on the other hand, for fees. We do believe that we will have from -- especially from the asset under management that we have, we and it was mentioned also by Gian Luca, that we have a strong increase there. And we want also to increase the ancillary business as is given us by our corporate customers and retail customers. So we do believe that we'll be able to increase the fees in this year.

Just to mention, as you know, we have launched the new specialized banking unit in private banking and wealth management, Banca Cesare Ponti. We strongly believe in specialization of the -- of this activity. And we have -- we are receiving right now very good feedback from our customers and from the market itself. This, together with the strengthening of our private banking and wealth management division will allow us not only to increase the fees coming from this business but also to better represent the real value of the different business units and those of our bank.

Inasmuch as 2025, it's too early to say. We are, again, envisaging, again, 3 rate cuts. Again, we believe around 25 basis points each, but it's really too early to say what could be the impact for '25. So I will stay with '24. And I think to Gian Luca for the Superbonus.

G
Gian Luca Santi
executive

Sorry, but about Superbonus, we read something on the newspaper. It's not clear for us. The perimeter is not clear, the impact, please, we have to wait some days to understand better what could be the impact for us. But now it's not possible to say something that is close to reality.

Operator

The next question is from Noemi Peruch of Mediobanca.

N
Noemi Peruch
analyst

I have a few, mainly on NII. So could you please give us a bit of color on your strategy on your bond portfolio for 2024? How come it did have so much in Q1 and will this trend continue. And on NII and on the quarterly move, I think you mentioned it before but I missed it. So if you could repeat the moving parts in terms of quarterly movement in NII, it would be very much appreciated. And then the last question on NII is again on tax credit.

So if you could give us a sense of the contribution to NII in Q1 and the amount as of March 2024. And on the average maturity, from your comments, I gather that the average maturity to be around 4 years, but no if I -- maybe if my assumption is wrong. And last question on NPEs. I see their outcome on Q-on-Q and if you can give us a bit of color on what drove this increase will be great.

G
Gianni Giacomo Pope
executive

Sorry, Noemi, but your question was not very clear because the -- we can't hear very well, but I try to start to answer. The color of replicating, I don't know what color can I do. The color is that we reduced the impact of the sensitivity, okay. If the interest rate go down 100 basis points to EUR 50 million, how? We make this with the hedging of the more or less 10% of our assets, not clearly not only asset, also liabilities, but to give you an idea.

We have EUR 14 billion of hedging position. And in this moment, this position can give us to reduce the impact of a decrease in interest of around EUR 50 million. I think that [indiscernible] the situation. I don't know what can be your question.

N
Noemi Peruch
analyst

No. So my question was on the bond portfolio that went down slightly Q-on-Q and I was wondering...

G
Gianni Giacomo Pope
executive

Sorry, Noemi, generally if I interrupt. I can't hear you very well so if you can, you can write to me that at least I prefer, yes.

Operator

The next question is from Domenico Santoro of HSBC.

D
Domenico Santoro
analyst

Thanks for making the call in English. I do have a few questions. First of all, on the NII guidance, assuming that Q2 is not going to be different from Q1, your NII guidance for the year implies that the second part of the year, the contribution from NII will decrease by EUR 120 million or more if the NII was [indiscernible] in 2024 compared to 2023. So I just wonder if you could work us through your math. And what is the negative component that is going to bring NII down in the same part of the year, given that your NII now is practically unsensitive to the level of rates.

Other banks have been a little bit more bullish, optimistic, given the guidance. So I just wonder here if there is a usual degree of conservatism. The other question is on fees. If you can give us the amount of certificates that you have distributed in the first quarter. And how much is the pot of unrealized performance fees at year-to-date?

The third question is on the dividend. If you can tell how much you have accrued in the capital this quarter in euro cents. The one on cost, instead, you gave already some details on costs on the savings for next year. And in the update of the plan you're mentioning, can you give us a direction for costs in 2025. A qualitative comment or a quantitative comment in absolute number will be also nice to have. And then in just detail, the negative item in the other operating income, I was just wonder whether you can explain.

G
Gian Luca Santi
executive

Yes. About the guidance, Domenico, I think, is correct, your valuation. Our expectation is to have a decrease in the second half clearly linked to the decrease of interest rate and the impact of the sensitivity is the fact that we are waiting for. About fees, I think that clearly now is not easy for us to quantify the revenues come from Arca, leading to the performance because we have only at the end of the year and for prudence, we during the year, we do not make a calculation because we have to wait the end of the year. Gianni, about the dividend?

G
Gianni Giacomo Pope
executive

Well, we have accrued EUR 0.16 for as a dividend for the first quarter. So today, we are positioned on a 50% or 70% payout depending on the stated or recurring net profit that we will analyze the situation going forward and decide at the very stage with the ambition to properly remunerate our shareholders. I can't be more specific than that.

G
Gian Luca Santi
executive

Sorry, Domenico. I forgot a question about certificates. During the first quarter, we issued for around EUR 240 million, and we had around EUR 6 million of fees from the certificates. About 25%, as CEO said, in this moment, we are analyzing the option for the possible review. And in this moment, we prefer to wait the end of the analysis.

Operator

The next question is from Hugo Cruz of KBW.

H
Hugo Moniz Marques Da Cruz
analyst

Just 2 questions. One on the Superbonus. Is there a -- can you tell us how much of your exposure has been issued in 2023 versus -- or has been acquired in 2022 versus previous years? Because I had the impression, right, perhaps right or perhaps wrong that if it's exposure from 2023, perhaps it will not have an impact on new measures that the government is planning.

And then another question on gross NPEs went up 6% Q-on-Q. Can you tell us what's driving that?

G
Gianni Giacomo Pope
executive

About the stock of Superbonus, we are close to EUR 6 billion, '24. About the second question?

N
Nicola Sponghi
executive

Hugo, sorry, can you repeat the second one, please?

H
Hugo Moniz Marques Da Cruz
analyst

Gross NPEs increased 6% Q-on-Q. What is driving that?

G
Gianni Giacomo Pope
executive

No particular issues because in the first quarter, as you know, we set up the selling of the current concern about the credit platform to Gardant. And usually, during the quarter, we sold some credit portfolio to manage clearly the NPE ratio. If you remember, in the fourth quarter '23, we sold of around EUR 150 million. But during the first quarter, we were working on the platform and we didn't sell nothing. This is the reason why you can see this increase. But it's no ordinary increase, no big position. And I think nothing of that can be dangerous for us.

Operator

[Operator Instructions] The next question is from Adele Palama of UBS.

A
Adele Palama
analyst

One question on the govies. So can you explain us that you are following for the book? Because I've seen that they have decreased. So might that have an impact? I mean, one of the reasons why, I mean, you're guiding for a lower NII or like equal to lower NII into '24 versus '23? And then can you give us the amount of TLTRO impact into the first quarter NII and what you expect for the following quarter from the TLTRO or the difference versus last year?

G
Gian Luca Santi
executive

Okay. About govies, well, you cannot see the decrease in govies, but you probably see the decrease in corporate bonds. The reason is the decrease is very strong because it is EUR 1.5 billion. The decrease is linked to sell bonds that are not useful for LCR or are not useful for or -- and clearly, we optimize the portfolio. A decrease in portfolio because a part of this portfolio is based on leverage. And clearly, if we pay more our financial funding, then the yield of the bonds, we prefer to reduce the stock. TLTRO impact is EUR 6 billion -- was EUR 6 million or so in the profit and loss, yes, EUR 6 million, the same impact of the fourth quarter. And if you analyze the delta, that is 0.

A
Adele Palama
analyst

Okay. And sorry, do a follow-up question on the hedging structure and apologies, I know this question has been asked already, but just to understand, I mean, so what's the size of the portfolio? You said EUR 14 billion. What's the maturity, the exit rate? And what's the sort of, if you can sort of say, the tailwind that will offset probably from the structure that will offset the decline in rates?

G
Gian Luca Santi
executive

Well, in this moment, the duration of the hedging is of around 2 years. Clearly, you want to know what is the rate. Clearly, the rate for breakeven point is between 2% and 3%. And our position is EUR 14 billion. Probably, we can manage with this hypothesis about interest rate, a maximum position of EUR 20 billion. But clearly, it depends to the evolution of the cure.

A
Adele Palama
analyst

Okay. This question was already asked but I didn't hear the answer. In the other income and expenses into the revenues, what do you classify there?

N
Nicola Sponghi
executive

Sorry. Could you repeat, please, because we didn't hear you pretty well.

A
Adele Palama
analyst

Yes. So into the revenues for the quarter, you reported around EUR 12.9 billion of other income and expenses. So what's that number? Like what do you quantify there?

G
Gian Luca Santi
executive

Well, in particular, is a deal that is compensated in other operating expenses income and in the net provision for charges because it's a penalty that we had in an old securitization but already write off in the past. And you have the negative effect in the other operating expenses and the positive effect in net provision for risk and charges.

Operator

The next question is from Noemi Peruch of Mediobanca.

N
Noemi Peruch
analyst

Hope you can hear me okay. I have just a few follow-up questions. One -- the first 1 is on your bond portfolio that decreased sizably during the quarter. Are optimization here is over or do you expect other adjustments in 2024? And then could you please go through your -- the moving parts of your quarterly move in NII. I think you briefly mentioned it during the presentation but I missed it. Sorry. If you could repeat it, that would be great. And then a very quick 1 on the contribution from tax credit on NII in Q1 by 2024.

G
Gian Luca Santi
executive

Okay. For the bond, I think that the strong optimization is done. Probably something else will be done in the next quarter but not so strong. For the tax credit was EUR 69 million in the first quarter. Q-on-Q, about the details of the other quarters. Well, I think that -- yes, we give only commercial and financial because we think that you can see clearly the movement. But I don't know what kind of analysis Noemi you need.

N
Noemi Peruch
analyst

Just wondering how much of the drop in NII was linked to the bond optimization or the increase in the replicating portfolio perhaps or your margin, just this kind of color.

G
Gian Luca Santi
executive

Okay, I can give you something. And after that, we will provide you and to the other colleague about other details. But I think I can give you an idea about the effect -- spread effect and volume effect on the net interest margin. This is the figures that I have in this moment. And if you analyze, there are EUR 117.6 million of delta. You can see that you had a positive spread effect of EUR 197 million and you have a negative effect from volumes that is EUR 79 million. In this moment, we don't have the details that you have request but we will provide you in the next days.

Operator

[Operator Instructions] Gentlemen, there are no more questions registered at this time. Excuse me, there's just one last-minute question, a follow-up from Adele Palama of UBS.

A
Adele Palama
analyst

What's the amount of upfront fees in the quarterly fee that you posted?

G
Gian Luca Santi
executive

We have a very low amount of upfront fees, and there are EUR 20 million in the quarter.

A
Adele Palama
analyst

And what was the level in the first quarter, above EUR 20 million?

G
Gian Luca Santi
executive

The same. Let me stress that here, we have a policy not to upfront fees because we prefer to have recurring fees during the life of the products that we are selling. This is the policy that we have at a bank level and we will keep this policy. We don't want to have upfront to create problem after a few years or a few months.

Operator

Gentlemen, there are no more questions registered at this time. Back to you for any closing remarks you may have.

G
Gianni Giacomo Pope
executive

Okay. Thank you very much for participating and hope to see you soon. Thank you. Goodbye.

Operator

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

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