Bper Banca SpA

MIL:BPE

Earnings Call Transcript 2023-Q2

[Operator]

[Interpreted] Good morning. Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the conference call on the BPER Group's First Half 2023 Consolidated Results. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Piero Luigi Montani, CEO of the BPE Group. Please go ahead, sir.

[Piero Montani, executive]

[Interpreted] Thank you. Good evening, everybody. It's been a longer day today. So for sure, it has been a long day for all of you, but it was for us in particular. Good evening and welcome everybody. What I would like to start with is by saying that we're very happy and proud with this result, our best ever first half. Our 6 month results are extremely positive. Our core business profitability has grown. Further improvement is registered in credit quality, combined with a sound capital and liquidity position. The second quarter closed successfully with a net profit of approximately EUR 414 million, which is 42.4% on the first quarter of this year.

Operating income totaled EUR 1,334 billion in the quarter, up 1.2% quarter-on-quarter, particularly driven by the strong increase in net interest income which settled at EUR 819 million with an increase quarter-on-quarter by 12.8%. Net commission income is very resilient and closes at EUR 490 million with a slight decrease quarter-on-quarter, that we will talk about during the presentation.

In terms of the profit, the -- so the net profit was EUR 415 million as we were saying and the strong revenue growth in the second quarter was underpinned by net interest income that closed with EUR 1.5 billion -- 96% increase on last year, still that, that region was not included yet, but the increase is very strong and net commission is almost EUR 996 million, with an increase by 9%.

With reference to volumes, total funding amounted to approximately EUR 280 billion, up 0.6% since 2022. Direct funding totaled EUR 114 billion, minus 1% since end 2022 and in direct funding totaled EUR 166 billion, up 1.7% since end 2022, which means that the deposits that exited was affected by AUM and AUC and so we have not lost anything. Cost income has stabilized or actually is at 51.3% and it's less than it was in June when it was 64.3% and the entire year data 2022 that was 65.2%.

As I was saying, at the very beginning, credit quality is improving further, additional de-risking has made it possible to continue downsizing our stock of non-performing loans. The NPE ratio, the gross pro forma NPE ratio was, in fact, down to 3.7% and it was 3.2% at the end of 2022. And the net pro forma NPE ratio is now 1.1% from 1.4% at the end of 2022. Coverage levels are likewise positive, with overall NPE coverage of approximately 60%. That loss 81.4%, it was 77% at the end of last year, UTPs were subject to 2 disposals in April and May, have a coverage at 47.2% and performing loans are at 0.81%. They were 0.77% at the end of 2022. CET1 ratio in fact was at 15%, which is much higher than the SREP minimum requirement of 8.5%. And our liquidity position is quite very strong, good ratios broadly in excess of the regulatory thresholds, 157.1% for the LCR and NSFR closes at 126.1%.

This is basically a year or a 6-month period that is really very good and which can hardly be replicated in the second part of the year. The numbers are outstanding and we must thank the entire bank for these results that the bank could in fact conceive of a growth activity. At the same time, bringing about a consolidation activity that we're carrying out, well, we should contribute to the network because against the backdrop of a very challenging scenario, they could keep balance without missing their targets that they could achieve successfully and they were also capable of consolidating the bank and at the same time working on growth.

And as I was saying before, it's a very good 6-month period, at least we're going to this 6-month period. And for sure, we will give more details about the entire year later, but I'm confident that the year will prove satisfactory altogether. So I will give the floor to Gian Luca, [ Santino ] that will comment all of the different milestones in the trajectory that we target during the presentation.

[Gian Luca Santi, executive]

[Interpreted] Good evening, everybody. I would say that we should take some sort of deep dive into the numbers that the CEO has hinted at. I would say that in relation to total funding, I would underline that 5th December 2022, we've had a growth of 0.6%, which means that direct funding lost 1%. Obviously, there was a movement in terms of current accounts, was quite significant, but I must say that the network was capable of intersecting and retaining the deposits, for instance, in that deposits, you can see that it has grown by EUR 2.8 billion, 1.7%, which means that inside this EUR 2.8 billion, there was a slight of about EUR 3.9 billion concerning the [indiscernible] deposit that read had at a price of 0 basically. So it was not generating any liquidity. So in terms of staff, the increase is much higher and as compared to -- and in terms of quality, we have been able to grow those in assets under management and life insurance.

So the property -- the funding of EUR 445 million in the first half of 2023. This data is extremely important for us and this is where we can take you through the network of the effort they made. It was EUR 5.8 billion of under writings and EUR 5.4 billion repayments, which means that an effort by the network to maintain competitiveness. The composition of funding is about 73% retail and 27% corporate. And as you can see, there is a percentage of current accounts and [ site ] deposits that is of around 83%.

As far as loans are concerned, once again, I would say that there has been good resilience in the quarter. We are facing a situation where in terms of retail mortgage loans, we know the difficulties of the household. So of course, we are originating less than last year, about EUR 1.7 billion this year as compared to EUR 2.4 billion in the first quarter of 2022. And I would say that the -- as far as businesses are concerned, they are trying to use their liquidity, so those are liquid are trying to use their liquidity, having retained a constant stock to us is an extremely positive result that is comfort for us about the second part of the year.

From a point of view of loan deposit ratio, you can see that, that is probably one of the best indicators in the Italian banking system, 78% is the value, which means that in terms of balance and liquidity, rules are very important. As far as asset quality is concerned, I think that everything has been said already, I would just underline probably the fact that there is a performing loan coverage of [ 381 ] since we've got overlays for an amount of EUR 310 million. And basically, the dynamics that you can see in Stage 2 loans that is not giving any signs, any negative signs. So as of today, we do not have any signs for a deterioration of credit, the -- what it's of pension loans or salary loans are stable. Of course, the amount is a little bit lower, but impairment signs are not this role, but as usual, we have maintained prudence and cautiousness and you will focus on that when we talk about the cost of credit.

As far as the portfolio is concerned, I would say that the structure is always the same. So we are at 30% to 36% of share of Italian government bonds, 35%, 36% and our duration is very low. And then you can see in the total portfolio, we've got 1.9 bonds and it's 2 duration 2 years for Italian bonds. And the average ratio was 2.42% as against a reinvestment ratio today of around 4%.

On Slide 12, you've got the profit and loss that all may already start to deep dive into. We've got a second quarter that is 12.8% higher than the first quarter in net interest income. We have tried to break down the TLTRO effect, so taking it away so that you can see the growth clean off this effect that will go on in the second part of the year and will be clear later on. So we've got an average growth of 30%, which is driven by the commercial part. You have the institutional part growing and I think -- and then there is an improvement in the yield of the securities portfolio.

As you can see, the ECB net position, do you see -- you can see the profitability there. We've got more deposits with ECB then drawings or borrowing from the ECB, so the position is positive to us and gives a positive contribution to the net interest income. And we've also analyzed the commercial spread by giving evidence of the effect of the Eco bonus as we call it in Italy, that in the first part of the year was important to us and reached during the 6-month period about EUR 70 million.

As far as net commission income is concerned, probably this is one of the most -- one of the nicest detail that we are presenting, a slight decrease by 3.3% quarter-on-quarter, it's reflective on the one hand of the request by the Bank of Italy to, in fact, counterbalance, so to say, the maneuver that they did on the current accounts, it reflect that the Bank of Italy made and we have already expensed it in the second quarter of 2023.

And as far as the trends in the other fees and commissions, we can say that last year and in the first quarter, we had illustrated the income coming from the bonus, commission bonus or [ RAPEL ] as we call it and performance fees. We have not recognized them this time and we will not until the end of the year because there has been a renewal of the agreement. But if we had to evaluate that now, it would be about EUR 10 million. So the pro forma data would show impact to growth, which makes us confident in confirming the guidance you gave.

As for the operating costs, as you can see, there is a growth by 1.2% and this reflects on the one hand, EUR 9 million worth of recalculation of the provisions to the termination funds based on the [ IIS ] which is the new market rate are asking for different discounting rates. And so you see EUR 9 million because of that here and what is important also -- what was important was the investments and so cost related to investments that we brought forward in the business plan.

So the business plan envisaged a number of actions and the profitability that we are obtaining is allowing us to bring forward a number of actions that we had scheduled for 2024, 2025. The cost income as was hinted at -- it's confirmed. And what is important here is that we have reduced by 1,000 units, our headcount since the beginning of the year, we've got a reduction of 228 branches.

As for the cost of risk, 60 basis points, it may seem -- it may look high, but in fact, based on our model, the cost of risk is little bit lower like 25 or 30 basis points, but we want to -- we're aiming at NT 0 and so if we have NTs and want them to be covered and I think that our coverage is evidence of this type of approach, which will enable us -- should there be a deterioration of the credit environment without having any effect on the profit and loss, we will be able to have a good effect or if there is no deterioration that we will have a value reserve, so to say. And then EUR 310 million overlays is the other points we mentioned in the slide. We have observed during the 6-month period, where there was a default rate of 0.9.

Now we come to liquidity. We have improved compared to December also in terms of eligible assets. As you can see, we have unlocked about EUR 5 billion worth of securities that we are guaranteeing the TLTRO, so to say. And then some other details were given by the CEO as far as the TLTRO is concerned, EUR 5.4 billion need to be repaid, 3.7% and 1.7% will be repaid by March 2024.

You have a capital walk on Slide 19 from 13.3% we get to 14% in June. So there is a contribution by 51 basis points that reflects the upside of paying during the quarter and 8 basis points of what we call deductions. There is basically some reversals on deductions that we were taking on DTAs and CET and then there is a good positive risk weighted assets dynamics due to a reduction or the non-grossing loans, but also a benefit of 8 basis points deriving from the fact that we can use for former Unipol Banca loans, our inter loan models, which makes us land at 14%.

I will give the floor to the CEO again for the conclusions. Thank you.

[Piero Montani, executive]

[Interpreted] So we -- to conclude, we have decided to give you some details on the group's expectations for 2023 with an update of our guidance for 2023. So the better-than-expected improvement in the macroeconomic outlook and the interest rates combined with our excellent business performance, we do not have any perception that it could be otherwise. Allow us to upgrade our KPI guidance for 2023 and with an expected net recurring profit of approximately EUR 1.1 billion. Unlike what we did in the past we have written it down and we expect that the net interest income will land at around EUR 2.8 billion, net commissions will be at around [ EUR 2.0 billion ]. Operating costs will amount to approximately EUR 2.7 billion. We expect the cost of risk of around 60 basis points due to the same cautious policy that we have adopted so far.

And for the reasons that Luca mentioned is our objective is best on having the utmost coverage, so that we can make choices of selling whenever this happens in the most clean way possible and we expect the CET1 ratio to get close to 14%, including on the back of the organic generation of capital. This is everything, this is all and if you have any questions, we're here, we continue to make questions, of course, the operating income is increasing. The quality of credit has further improved, the capital and liquidity position is solid and there are projects that are being leaders ahead of the business plan schedule. I'm saying this with confidence because even though we were helped and supported by a supportive interest rate environment, it's also changed that going beyond this aspect, the business plan has unlocked and released all its effects in a very concrete way and ahead of time. So we are confident that we can face the challenging market scenario from a position of strength.

So I would like to thank you for the patience you have in waiting for our presentation, this slating the evening and this is now the time for questions and answers.

[Operator]

[Interpreted] [Operator Instructions] The first question is from Noemi Peruch from Mediobanca.

[Noemi Peruch, analyst]

[Interpreted] I have 3 questions. My first question is about the cost of risk. If I remember correctly, last time, you gave us the guidance for the year that is now lower. So I would like to understand what has changed? It was 40, 50 basis points, so why is it 60 now? So net interest income in the first half of 2023, what will it be?

So should we consider your guidance as conservative? Or do we have a campaign to increase the market share you have in loans for the second part of the year? And then my last question is about the payout. I would like to ask you whether you can share with us some ideas you may have on the plan for 2023 for the rest of 2023 and in the second quarter, the payout is -- in second half, it will be down by 16% for the guidance in the net interest income, sorry.

[Piero Montani, executive]

[Interpreted] Well, about the first question, I would like to correct something. We had not said 40 to 60 basis points, we had said 50, 60 basis points, we have never said 40. Now we have communicated 60, but Gian Luca said that based on our models, the cost of credit is lower, it's not at the cost of credit, I'm sorry, the credit quality has decreased. We just wanted to be prudential to -- because -- and this evidence of this is that coverage has increased. So we're not changing anything. We're keeping adopting this prudential approach.

As far as the guidance on net interest income for the second part of the year, obviously, we consider that as fair, probably a little bit conservative if you want. But from what I could interpret from the other banks, I think that the other banks also did not -- we're not far from this. As far as the payout ratio for 2023, we may not have said it, but we have EUR 0.15 cents have been accrued so far and we think the payout will be between 35% and 40%. That is the objective we have.

It will also depend on the trend, but what we want to retain and maintain is a CET1 ratio of around 14%, but the payout we gave is guaranteed.

[Operator]

[Interpreted] Next question is by Giovanni Razzoli from Deutsche Bank.

[Giovanni Razzoli, analyst]

[Interpreted] I've got 3 questions. The first one is about cost because I was looking at the target for 2024, [ EUR 2.6 billion ] is the target and consensus is of around EUR 2.8 billion, so it's above that. And your guidance, if I'm not wrong for 2023 was EUR 2.7 billion. So in light of the new contract and inflation and inflationary pressures on costs, is there going to be a change and what expectations we have for 2024. LCR will post TLTRO, can you give us color on that? And what exposure -- residual exposure do you have with the ECB? And then how much did you collect with the promotion of your deposit current accounts, I think, at 5% that you launched at the end of March?

[Piero Montani, executive]

[Interpreted] Well, I will try to answer your question. Well, as far as the renewal of the labor agreement, we cannot give expectations now, if we do not have than yet. The labor agreement has expired long time ago and have been extended until July with the objective of reaching an agreement by the end of the year. Now the labor agreement has been extended until 31st December. So I do not know there will be room for provisions for next year because the agreement is valued until the end of this year.

So we cannot do large, then it depends on how negotiations will go on. I don't know if there will be a way to conclude that beforehand, we'll have to wait. As far as LCR, the LCR is concerned, Gian Luca you may add further to what you said before.

[Gian Luca Santi, executive]

[Interpreted] Yes, our objective without the CRO is to be in an area of 140, 150, that is going to be a very solid area in terms of liquidity. As for the promotion of the deposit accounts at 5%, I think we collected EUR 300 million, yes. We must also say that it's a little bit too early for us to calculate that because this has just started. Other banks have also launched important campaigns and our time schedule is longer. So we'll have to -- you will have to take these numbers for what they are. It's not yet the time for having a final analysis.

[Piero Montani, executive]

[Interpreted] If I can add something, Gian Luca, you talked about I assume as agreements that were, in fact, terminated and what was the impact? EUR 3.9 billion that was in a deposit under custody with Carige at price 0. And we have terminated the agreement with them [indiscernible], moved their securities with another bank. So we are losing 3.9% in terms of stock, but nothing in terms of profit and loss. The microphone is not on. We have terminated all of the agreement with Carige and so as [indiscernible] and other counter parties.

[Operator]

[Interpreted] Next question is from Andrea Lisi of Equita.

[Andrea Lisi, analyst]

[Interpreted] My first question is about the trajectory that you are hypothesizing with a forward curve that we are now observing in terms of net interest income for 2024 and also the capacity you think you have the ability, you may have in dealing with the commercial aspects and the commercial spread. So how do you imagine the net interest fee income for 2023, as it was a peak that will down that will then go down later on or do you expect it will be stable? So that is a little bit what my question is about. Then the second question is more related to the Italian banking system. Other banks are indicating a CET1 ratio than you're 14% -- than your 14%. So I would like to ask you under what circumstances could you consider CET1 lower than 14%, if there are room for you to consider some different aspects would you be interested in going beyond also in terms of M&As?

[Piero Montani, executive]

[Interpreted] Well, first question, we cannot give our forecast and expectations for 2024, we want to wait until the end of the next quarter after the end of next quarter, we will be able to give you some more guidance. As far as the peak in net interest income is concerned, well, of course, keeps changing. But objectively speaking, I would say that 2023 or actually this month period has reached its peak and then we will see what happen in the future. But as for the CET1 upfront, we're looking at our own data and not at the other banks and we think that 14%, considering everything is a good level of capital for the development of this bank to be based upon. And so this is what I would say.

[Operator]

[Interpreted] Next question is Adele Palama from UBS.

[Adele Palama, analyst]

[Interpreted] I have a few questions on the NII and I apologize if I'm making this question again, but I may have missed your answer before. So I've not understood very well what the assumptions are that you take for the guidance through 2023 in terms of deposit EBITDA and interest rates and average rates for the second part of the year. Because as my colleague was saying for, there is a reduction -- material reduction also excluding and by excluding the TLTRO.

And then in the first quarter, if I remember correctly, I think there was also a positive contribution of the TLTRO in the quarterly results in terms of NII of -- for EUR 1 million I think and this would change the underlying growth in net interest income. And then overlays, I couldn't see them in the presentation, can you confirm the amount of the overlays, please?

[Gian Luca Santi, executive]

[Interpreted] What we expect and probably I would start from the overlays that is going to be the easiest part, EUR 310 million is confirmed. Then as for the assumptions that we throw for the second part of the year, the baseline assumption so to say, in terms of beta, we have talked about it quite on many occasions. And I would say that it's very good beta. We have the real business of about 10%, so very low. And -- for the second part of the year, we think we will retain the second level -- I'm sorry, the same level in lending and the change of the first part of the year in terms of funding will also be maintained. So we expect there will be some exit in terms of deposits that will be intersected by the AUM or AUC.

So the only thing that will change is going to be a cost because, of course, the cost of funding will increase. Also the cost of lending will increase more moderately. So the overall return is going to be, for sure, lower. These are the assumptions we show all in all. But the deposit beta for the end of the year, what is it going to be 40%? Deposit beta, well, based on our models, we've got 27% retail and 59% corporate. As the CEO was saying before, now we are observing a 10% level. Of course, model work either on time series or on static situation. So the fact that we had a movement in site deposits during the first quarter by about EUR 7 billion of cost has an effect and so the models cannot intersect that.

But we can say what we are observing today, in terms of expectations or forecast, so just for you to have some more details, we think that there may be a deterioration in the commercial spread by about 30 basis points with an average cost of 30 basis points higher in institutional funding compared to what we had in our forecast. And so the combination of these factors, together with the lack of TLTRO, we had EUR 4 million of TLTROs in the first quarter as a contribution to the net interest income. And then in the last quarter, we will have the compository reserve that will pay 0 instead of paying full, which means that, that's another EUR 10 million.

So there's a number of effects that lead us to think that the net interest income will be slightly lower than in the other quarters, that's why we've got the guidance of 2.8.

[Adele Palama, analyst]

Excuse me, if I can make a follow-up question. Are there any effects that you expect in the TLTRO for the next quarter? So is this EUR 45 million positive -- if they were last positive effect?

[Gian Luca Santi, executive]

[Interpreted] No, they may not be the last positive effect, comprehensively we may have about EUR 20 million in the last 2 quarters.

[Operator]

[Interpreted] Next question is by Marco Nicolai from Jefferies.

[Marco Nicolai, analyst]

[Interpreted] In a context where the net interest income may go down in the future as your guidance is also reflecting and in a context where interest rates in 2024 and '25 may go down, what operational levers may you activate or to retain the return on equity level? Will you operate costs or net fees and commissions, what will you do?

[Piero Montani, executive]

[Interpreted] Your question is, in fact, included in your -- I mean the answer is in your question. So you've already said it, basically, looking at 2024, 2025 now is difficult. It is difficult to predict. I do not know who can predict. We may try and give some indication for 2024, but of course, we need to see what happens in the next quarter. So it's clear that the levers you mentioned are the ones we will operate. So deliver our cost, for instance, we hinted at that and it's true, we are operating this lever. But unlike what happens with the other banks, when you look at us, you should also consider that we cannot compare ourselves to the entire universe because I would exclude from the comparison UniCredit and in Sao Paulo, they play in the same league, but they've got a different scale.

Then there's Banca Popolare that is comparable. So their extended cost is more limited, but you so consider that in claims of combinations they did that 7 years ago, whereas we have, in fact, absorbed the branches of [ UBI ] and Carige just 2 days ago basically. So very recently and that's why we're still working in this direction. That's why I pay tribute to the network because they could bring in parallel 2 operations. And so the merger and also keeping balance and pursuing their objectives, of course, cost discipline is something we are very much interested in and we're very much focused upon and we will focus upon in the future. We will continue this trajectory.

The network is performing very well and I'm saying this and I did say that before with doubt the price because the results are positive that we're expecting the results, but they were not to be taken for granted and instead all of the branches that have been awarded from UBI and also from Carige with the situation that was not very optimal because of their legacy in terms of cost income, well, they are yielding very good result. So we think we will have a good development and growth of customers and net fees and commissions.

On the other hand, as Gian Luca was saying, fees and commissions have gone down by 3% because of some very specific reasons that the performance was good. We cannot yet anticipate anything for the next quarter, while we must say that everything is going in the right direction and that's why we're confident.

[Gian Luca Santi, executive]

[Interpreted] I would just add one thing, I would say that we are happy because of the conditions of the commissions because of what the underlying factor is, we've got product factories in terms of AUM. We've got a product factory that makes us proactive in proposing good products with relationship with Arca that makes it possible for us to be prompt and rapid in the proposition to customers. And then we've got agreements with UniSalute, that is the partner in terms of health and Medicare insurance in Italy. And so the development of these combined activities is triggering good dynamics in terms of fees and commissions that are very positive for the future.

[Marco Nicolai, analyst]

[Interpreted] In terms of -- sorry for the follow-up, but you've got these partnerships with your -- and are there anything -- any aspects in your contracts that can be improved? Or is this going to be stable?

[Piero Montani, executive]

[Interpreted] No, there's nothing in terms of -- there's no deadline in the agreement, so Unipol agreement was renewed recently. And then behind Arca, there's Unipol and the contract has recently been renewed and there are no other contracts that are coming to maturity or expiring and the other partnership in terms of the asset management, we are the majority shareholder, we are consolidating it or come -- so there's nothing that is expiring or to be reviewed.

[Operator]

[Interpreted] Next question from the English conference from Hugo Cruz.

[Hugo Moniz Marques Da Cruz, analyst]

I just wanted to ask 2 questions. So 2 questions on NII. First, could you explain how the Eco bonus works on NII, what's the impact, will there be a conversion of the margin between what you report and the margin performance portfolio for the Eco bonus? Second, on NII, I didn't understand why you're guiding for peak NII already, which is very different message from all the Italian Banks that reported so far, you still expect some growth. So if you could explain why are you different from your rent? And third, on the CET1 ratio, is there any headwinds or pay varies that you want to point out the size the usual retail earnings in RWA?

[Piero Montani, executive]

[Interpreted] Well, in terms of the Eco bonus, maybe Gian Luca, you want to add something, you've hinted at that before, but you want to give the volumes about that. So on -- separately, you will receive more indications. And net interest income and the peak, the peak its being witnessed now and the others are seeing an upward trend, we are not, each one has got its own assumptions, based on our assumptions, we do not think there's going to be an upward change in net interest income. As we were saying before, we expect there could be a top shop on interest rates and lending may go up a little bit and so the contribution we're seeing is lower. That's why you have those result, we will see what the evolution will be.

Then in terms of CET1, I do not think there's anything more that we should add to what we have already said or probably just in terms of Eco bonus, we buy credits or loans that are certain receivables actually that implies. And the delta is contributed to the net interest income.

[Hugo Moniz Marques Da Cruz, analyst]

Sorry. Can I ask a follow-up?

[Piero Montani, executive]

[Interpreted] Pardon, other one that is follow-up.

[Hugo Moniz Marques Da Cruz, analyst]

If rates go up, so you see the raising rates again in September, do you expect that to have a positive impact on your NII and you have to be impacted it, please?

[Piero Montani, executive]

[Interpreted] One may be effectively that could, if you think that there may be a recovery, but I don't think this recovery will be retained until the end of the year, probably immediately there will be. But this 25 points basis points will be probably absorbed in the second part of the year.

[Operator]

The next question is by -- from the Italian conference call, Mr. Carrese, Christian from Intermonte.

[Christian Carrese, analyst]

[Interpreted] I would like to make a question about the guidance on capital. So the minimum threshold that you want to maintain is 15%. And so this guidance going beyond the growth that you expect in assets, is it associated also to guidance from the ECB in light of the stress test that we are particularly penalizing because they did not consider the actions that you have, in fact, put in place in 2023? Or secondly, do you want to keep a buffer to look through 2024 possibly for other M&A basically in the and the -- you were saying that you want to maintain the focus on the consolidation of UBI. And then you said that in 2024, you would have considered the options and in terms of interest rate levels and the good and changing net interest income, I was wondering, would it be -- is it an obstacle to M&As or not?

[Piero Montani, executive]

[Interpreted] Well, first answer, there's no guidance from the ECB in terms of the latest inspections that were very successful, they were very good. And then probably, if you look at everything then the data could be a little bit less positive because of the 415 basis points, but we were starting from figures effect 31st December and based on exchange rule that we were penalized. What I mean is, in December, we alluded the DTAs and they were only capitalized on the 1st of January. But on the 31st of December, they could not be considered as capital. And so that's why 14.7% was ours, I'm sorry, 12.7% was our starting point.

And so starting from there, the benefit was only partial, but there's nothing about it and the ECB has given no instructions or indications in this -- as far as this is concerned. I have said it quite often, consolidation mergers are not a priority to us. What we want to do is to focus on the 2 entities that we have absorbed. And so we want them to be at steady state as soon as possible. So 15% is the good level of capital we want to have for going on with the growth and development. Then if ever an M&A comes up, it's something we do not know about now and it's not being like emphasized we have nothing to say about that. So it's not the level of interest rates or nothing is an obstacle, but capital is important to us. And I've looked at the results of the other banks and I think that in terms of CET1, all banks have gone up, which means that maintaining CET1 of this type is absolutely fair and correct. We do not want to go down, then the feature is the feature, we'll see that when it comes.

[Operator]

[Interpreted] [Operator Instructions] Mr. Montani, there are no questions registered at this time.

[Piero Montani, executive]

[Interpreted] Thank you for joining the conference call. Should you need any clarification, please get in touch with us. I would thank you twice because it has been a long day today and you will have to work for all night to write your analysis. And so thank you for being with us, have a good evening.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]