Mediobanca Banca di Credito Finanziario SpA

MIL:MB

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Mediobanca First Quarter 2020/2021 Results Conference Call. [Operator Instructions] For your information, this conference is being recorded.

Now I would like to hand the conference over to your speaker today, Mr. Alberto Nagel, CEO. Please go ahead.

[Alberto Nagel, executive]

Good afternoon and thank you for joining the call. This is the call of the first quarter where we can say we have had quite a positive start to the new financial year where some business recovery after lockdown was ahead of expectation and despite seasonality. In particular, IB revenue was picking up and the pipeline rebuilding after the lockdown. New loans in Consumer Banking was back -- were back to 75% of pre-COVID levels, and this was enough to offset the loan expiring in Q1. And we have still enjoyed a very solid trend in Wealth Management, in particular in Affluent and Private segment.

These positive commercial results were coupled with quite a sound exit from moratoria in all business segments. Notably, Consumer Banking, 90% of loans under moratoria have expired and roughly 90% of which have resumed regular payments. In mortgages, 16% of loan under moratoria have expired, 85% of which have resumed regular payments. So the moratoria at Mediobanca Group halved to 3% of the loan book and are already provisioned.

The bottom line of the Q1 was EUR 200 million and was 4x the last Q, with a ROTE equal to 9%. CET1 was robust at 16.2%, with 70% dividend payout accrued. Revenues, 3% up Q-on-Q to above EUR 600 million, driven by core revenues, in particular, NII and fees that were up 9%.

Cost of risk halved to 61 basis points. It was 141 in Q4, and gross NPE stable at 4%. Last but not least, we have anticipated timing of execution of some CSR ESG strategy with the green bond issuance ahead of schedule.

In the snapshot on Page 2 -- on Page 4, sorry, you see the divisional results. Wealth Management was 4% up Q-on-Q in terms of revenues and 4% year-on-year. Net profit was 58% Q-on-Q and 11% year-on-year. ROAC has been improved to 20%.

Consumer Banking contained very well the revenue attrition. So it was minus 2% and minus 3%. And at the end, the profitability bounced back to EUR 72 million with plus 48% Q-on-Q and minus 18% year-on-year, with ROAC that had a marginal decrease to 27%.

Corporate & Investment Banking enjoyed a very good quarter with EUR 133 million (sic) [ EUR 183 million ] of revenues, way higher than previous Q and previous year. Net profit 3x and ROAC, which topped 19% level.

In fact, we had a quarter where Advisory revenue, Capital Market revenue and market revenue were on the high end. This was basically the results of origination and execution activity that was halted in -- during the lockdown, but then restarted quickly and led to important deal execution, not only in Italy where there are some very visible non-bank transaction, but also in Europe where we had at least a couple, if not 3, landmark transaction in France. This led to EUR 41 million of Advisory, and this was coupled with EUR 15 million of ECM, having done one of the most important IPO in Italy and having done a number of bond placement in the quarter.

Fees in -- were robust in CIB, but there were also in Wealth Management where they continue to have an inflation trend, which is in line with our plan and is backed by renewed distribution enhancement and -- visible in Affluent and Private Banking. So we have had roughly EUR 1 billion of net new money in Affluent as well as an important inflow in Private where we have offset deposit outflow with important, sound inflow of AUM. So in terms of also profitability, this matters.

We have had EUR 0.5 billion of outflow due to ongoing optimization in unprofitable institutional mandate of our MB SGR in particular institutional mandate, while we have zeroed outflow in systematic. And we have launched a new CLO at Cairn level with EUR 300 million raised.

As said, the 2 engine of fees made that this was the best quarter in the last 3 years in terms of fees. So in the region of EUR 190 million, and with not only a quantitative impact, but also qualitative impact.

If you see the comparison on Slide 8 of fee pool as of today compared only to some years ago, you can realize how deep was the transformation of the bank. Today, the fee pool coming from Wealth Management is 47%, and the CIB is important, but it's 34%. 7 years ago, it was 48% CIB and only 19% in Wealth Management.

Fee, on the rise, and NII and loan book having good support. Consumer, in particular, as said, new loans topped EUR 1.5 billion, recovering to 75% of pre-COVID level. As a reminder, in April, we were at 20% with the full lockdown. Then mortgages restarted with EUR 0.4 billion. It's not so far from the pre-COVID. And in corporate, we have had more calm quarter because we have had a normalization of RCF line that were drawn massively during the COVID.

This activity in loan generation resulted in resilient NII and in revenues well above EUR 600 million with core revenues, as said, up 9%. So we were expecting a lower NII, so having a more important decrease. We contain in 1%, and this was, as I said, on the back of very important effort in -- particularly in consumer, but also in CIB.

The only element was -- which was negative was the contribution of PI, and this is explained by some extraordinary negative this year compared to positive last year. So last year, we had an unusual EUR 136 million contribution. This year, we had EUR 44 million, while normally, this is a contribution which is between EUR 50 million and EUR 60 million.

Loans under moratoria halved, and they are over in Consumer Banking. You see clearly on Slide 11 that we started with EUR 2.7 billion, and we are now at EUR 1.4 billion. Consumer is over. We have a very marginal residual moratoria, while mortgages is -- of EUE 500 million, 25% is expiring by the end of December and 60% by the end of June 2021.

Leasing, we have EUR 700 million, out of which 17% are related to clients that will not extend period and will resume a normal payment in this quarter. And almost all of the remainder expires by the end of January 2021. So the overall moratoria is now just 3% of group loan from 5% of last May.

The low-risk profile and the asset quality has been strongly reaffirmed. Today, as I said, we have 3% of moratoria compared to 12% and 22% of Italian listed and non-listed bank. But which is more important is that stage 2 is 6.4% in Mediobanca compared to 8.2% of the European average and with the coverage, which is way higher on our stage 2, it's 10.3% as opposed to 3.8%.

In stage 3, we are at the level -- roughly at the level of EU leverage. But our stage 3 loans, as we can then comment, it's made in part from UTP, which are likely, in fact, to be reclassified into bonds. We still maintain a very ample buffer over the threat. So it's something like more than 800 bps of buffer and 650 bps of fully loaded. MREL and liquidity and funding ratios are at strong level.

And the CoR reached 61 basis points for the group, which is broken down in 2 pieces: One is, of course, the consumer. Consumer is 248, was supposed to be around 300, but the trend we have experienced was much better. And hence, we had to break it down to 248. While in consumer, we continue -- sorry, in corporate, we continue to enjoy some important write-backs. And so this was a positive of 38.

Gross NPE stays in the level of 4.2%, and performing stage 1 and performing stage 2, we can see that we have slightly increased the coverage in stage 1 to 0.56%. And we have also increased the coverage -- or performing stage 2 at 10.3%. So in a nutshell, those results are indicating strong trend in core revenues due to effective business diversification, increasing recurring items and funding cost optimization that were partly offsetting margin pressure because of abundant liquidity in the market and volume slowdown in Consumer Banking.

When we go and see the CET1 evolution, it stays in the level of experience in June '20. So 16% -- in the area of 16%. This is because of earnings attrition, reduction of Generali and dividend accrual. We have set the distribution policy for 2021, and we have opted for a cash dividend payout, 70% of reported earnings, obviously subject to ECB authorization.

Now going to divisional results, I want to stress some initiative and qualitative activity we have had in the different business because we have already commented numbers. Basically, the job -- the main job we were doing in Wealth Management is enhancement distribution. We have restarted to recruit a professional after the lockdown. We had, had a slowdown because during the lockdown, hiring was more difficult. We have restarted. And now we are adding 29 professionals. This is one important activity.

The second is brand and product update. You remember that when we presented the plan, we have clearly forecast this one as one of the main activity to be done. So pushing up CheBanca! in the value chain and pushing up also the product mix of Private Banking and Affluent banking.

Now this quarter, we have launched a very important new brand campaign at CheBanca! and Compagnie Monégasque. And so we will continue to segment customer in a different way, price them in a different way according to the offer we reserve for them.

In liquid offering enrichment at Private Banking level, you may have seen that Mediobanca Private has been very active in all what was related to club deals, in particular, real estate, but also distressed debt fund. And we have also, as I said, launched the new CLO at Cairn as well as we have launched a new ESG climate fund at RAM.

So overall, Q1 results show solid trend with growing TFA, revenues and bottom line. TFA, up 3%; and Q1 revenue, 4% Q-on-Q year-on-year, with strong contribution from both Affluent, up 8%; and Private, up 7%.

Cost control led to a better cost income, which was brought down from 77% to 75%.

In consumer -- so just to finish ROAC of Wealth Management division, improved further from '19 to '20. In consumer, we have devoted a lot of effort again to improve the way we sell consumer loan. And we have reached 25% of the direct loan distributed via Internet. It was 15% in Q1 of 2020.

New openings in the quarter: branches up 4% -- number of 5 new branches and the agency up 3. Impact of possible second lockdown now mitigated because we have more developed integrated multichannel platform, operative at both business and collection, which is even more important level.

The mix has been reshaped back to profitable -- more profitable profile. So personal loan recovering. They are up to 2x Q-on-Q, but still lagging compared to current special purpose loan. So at the end, the results of consumer were much better because revenue contraction has been more limited. And particularly LLPs still affected by COVID impact. So they were up 23% but substantially lower than Q4, down 33% on good trend in moratoria and collection indicator, which are quite interesting. Asset quality confirmed strong with net NPE on loans down to 2.3% from 2.5%, with improved coverage ratio, up 3% Q-on-Q to 71%.

If we go and see Slide #20, you see on one hand that we are on moratoria at the pre-COVID level. Because pre-COVID, it was like adding EUR 25 million, EUR 30 million of moratoria, normal moratoria, not COVID related, and we are there. But which is even more interesting is that early deterioration in asset quality indicator are now back to the pre-COVID level.

You see the graph on the top right part of Slide 20. And the new default loan, the level, the number of new defaulted loan after the peak in May went back to pre-COVID level. Coverage ratio has been strengthened, and NPL stock and ratio remain excellent because we continue to dispose and to sell NPEs. So overall, the contraction of profitability has been limited, and ROAC of consumer was still on the high level of 27%.

As said, CIB had a strong start. This was based on some landmark transaction that we have mentioned. This is for M&A, is for lending, for ECM and for DCM. CMS revenues were less buoyant because of attitude of clients, which was more cautious in this quarter to buy structure product. So Q1 net profit was EUR 85 million, 3x the last Q, and up 50% year-on-year, reflecting higher revenues, up 31% with increase, important increase in fees despite not all fees from the above deals have been yet included in the quarter, and also a good trend in NII, which was up 5%.

We have, of course, revisited -- review also total costs because we aligned a variable labor cost to the revenue trends. So we have increased cost as well as following the trend in revenues. But notwithstanding this, the cost income ratio was down to 40%. We have had some write-backs. And we confirm that our asset quality in CIB is particularly solid because the exposure to the most affected by COVID sector is very limited.

Here, we have a sample of transaction we have been doing. It's important to stress the more sizable and visible transaction. But I want to tell that we are becoming really very strong also in mid-corporate, with a new string of deals that are booked in the quarter and in the next few one.

PI ROAC down to 13% because of, as I said, the nonrecurrent item in Generali, but still quite interesting contribution. Holding function, basically with an ALM assuring comfortable funding position and with CoF flat. This is the mix of better cost of funding coming from market and ECB, but higher cost of funding related to the fact that the interest rates went down during the period. So at the end, with deposit flat in terms of cost, we had a neutral effect on cost of funding.

Funding stock, up 3% Q-on-Q and 8% year-on-year, with a more important use of TLTRO because we wanted, as we explained in the last call, to soften the NII drag with a portfolio of loan. And the loans stable at 1.8% (sic) [ EUR 1.b billion ], but this is the leasing portfolio, which is going into -- deleveraging into optimization.

As a closing remark, key topics ahead. Top line resilience confirmed where we see positive trend in fees supported by Wealth Management and IB, as I said, because some important deals announced have not produced any fee event up to today. NII contraction manageable. New loans of Consumer Banking are recovering. Margin pressure ongoing, but CoF under control. And we have low interest rate sensitivity confirmed. PI income, after the swing of this quarter, should normalize in the quarters ahead.

So top line resilience confirmed. Better CoR trend because of moratoria, very limited impact from calendar provisioning and even moderate exposure to the macro deterioration.

We have a strong commitment to resume dividend distribution. This is, of course, subject to the policy and authorization of ECB. But basically, the 2 pillar are 70% cash dividend for this year, and then when it would be possible to start to optimize capital ratio to out 2023. So when there will be a phase out of the impact of COVID with a mix of cash dividend and buybacks. So also resuming buybacks will be important, but this is going to be linked to the general outlook and the impact of COVID.

So these guidelines are based on the fact that we may have some days of lockdowns, but not a major generalized lockdown like the one in April and May or March and May. But in anyhow, Mediobanca show to be very well equipped to cope with COVID emergency and to react fast.

In fact, if we can come to closing remark, this first Q show a very positive start to the new financial year that is supported by all business segment, which were reacting fast. Net profit, 4x to EUR 200 million. CET1 is 16%. Growth in revenue, in particularly in core revenue. A strong trend in CIB and in Wealth Management and very good trend in cost of risk.

All this confirm the validity of our business model. Lockdown impact was managed successfully, have shown superior capability in terms of commercial reaction by business segment, asset quality management, earnings and capital creation. Impact of a possible second lockdown is now mitigated by more developed integrated multichannel platform, operative at both business and collection level.

So we need to stay focused to implement the vision and action of our 2023 strategic plan as well as to be among the leading pack bank in terms of shareholder remuneration policy. Thank you very much. It's now time of your question, and so please go ahead.

[Operator]

[Operator Instructions] We are now taking our first question from the line of Antonio Reale from Morgan Stanley.

[Antonio Reale, analyst]

And well done on the numbers. I've got 3 questions. The first 2 on your operating trends and the last one on strategy, capital deployment. So the first question is on NII in consumer finance. We've seen new loan origination being a lot more resilient than initially feared and I think even that you initially guided to. You had 75% of your pre-COVID run rate origination in the quarter. In your previous guidance, I think NII was going to trough in Q1 2021.

First question is, is this still the case? And how do you see consumer origination and group NII going forward? That's the first question.

Secondly, on cost of risk, it was 61 basis points in the quarter, which I think is much better than the full year guidance. Now I've seen no mention of the guidance, which I think, if I remember correctly, was 83 to 100 basis points for the full year. How should we think about this guidance going forward? If you can share what your expectation is as well for both consumer and CIB, which were back on single digit in the quarter? That's the second question.

And lastly, on capital and dividend payout. I mean I've seen your intentions to increase payout to 70%. How should we think between the trade-off of higher dividend payout, share buybacks and M&A? I'm asking you this because if I remember correctly, having a 50% payout was for you a sort of balanced way to remunerate shareholders while at the same time remain opportunistic about M&A. Has this changed? Has this outlook for M&A changed, implicitly implying there's no appeal for the time being?

[Alberto Nagel, executive]

Thank you, Antonio. In terms of NII, I tell you what we have experienced up to today and I make also a caveat taking to consideration of this new partial lockdown. Now we thought to be today at 50% of new loan -- new consumer loan origination. But indeed, we are at 75%. So should it stay the same, we would have reached the 100% of new loan, so reaching the normal trajectory by December.

Now the only question mark is if this situation we are experiencing in Italy of closure of some activity is going to last. Is going to last for long, and it's going to be widened. In this case, I think we will go back to the original forecast where we're going to be at the same level of last year in the second half of this year. But normally, if this ban are lifted or they're not impacting too much the sale of loan, we would have been by the end of December at the same level of new loan production of last year.

Cost of risk is, for us, less affected in the sense we are more convinced that even with the new lockdown, we will have a lower cost of risk compared to what we have expected. We have expected as -- we have given a guidance of 83, 82. Now we are at 61, 62. I think we're going to be closer to this number by the end of the year as we see today compared to what we have said 3 months ago.

Why this? Because not only the new defaulted loan are very low, not only the moratoria are very positive. But what I can tell you is that in the numbers that we have booked in this quarter, we are taking a good deal of conservatism, already implying a higher defaulted loan trend for the next few quarters. So we are already taking some extra provision in order to be, I would say, prepared.

Now capital, you said how you set yourself between dividend, buybacks and M&A. I have to say that today, the priority is dividend. Why? Because for our shareholders, it's very important that we can come -- we are one of the few banks that in terms of capital, asset quality and risk, according to our review, we may be authorized to pay. And we want that this is something that investor can perceive. So Mediobanca to be one of the few banks in Europe to be allowed to pay dividends. So we need to push on dividend distribution rather than doing this year buyback.

Buyback on top, we don't have any more authorization to do this. So it will be practically not doable this year because we can't buy. So we need to go into a new general meeting and be authorized. So priority is dividend, as we said. And then M&A can be the opportunistic M&A, which has no impact on dividend and/or more important M&A.

On more important M&A today, we don't have available counterparty. So we are working. We need to prepare this event. But -- so I don't think that today, we have an event that prevent the policy of 70% to be somehow delivered throughout the year, of course, ECB having authorized us.

[Operator]

We are now taking our next question from the line of Giovanni Razzoli from Equita.

[Giovanni Razzoli, analyst]

Three questions on my side. The first one is a guidance or a flavor as far as the -- one of the main element -- positive element for this quarter. That is the advisory M&A fees. The wording of the conference call was quite optimistic going forward. So I was wondering whether this business line, over the next couple of quarters, can continue to generate revenues in the region of EUR 30 million, EUR 40 million, taking into consideration that the pipeline that you have and the additional landmark transactions that you may be involved and that were not yet booked in this quarter.

The second question is about a very interesting comment that you have made. So basically, you said that even in case of a new lockdown, the consumer credit risk profile should be -- has improved so that the cost of risk should remain below the 375 basis points that you were guiding us during the full lockdown. If I'm not mistaken, you were mentioning a EUR 40 million per month in terms of cost of risk during the full lockdown.

So my point is this 370 basis points should be lower in case of full lockdown? And can you provide us a couple of examples of the operating changes that you have made resulting into this structural improvement?

And then third question, which is more broad at the sector level. During a public speech, you have mentioned that the calendar provision is a bomba atomica for the Italian banking sector. If I'm not mistaken, you were also quoting the possibility that there is a capital deficit for the industry as a whole. If you can please share with us what is the reasoning behind these statements.

[Alberto Nagel, executive]

Thank you very much, Giovanni. Guidance on advisory. Now if you see the announced transaction, and if you see what's in, in this quarter, in this quarter, it was part of -- in case of [ UBI ] and other -- and I would say, the ECM IPO. So it means that important part is not yet in. Of course, we need to see when they are going to materialize, maybe in Q2, in Q3.

But I think that between what we have announced in Italy, what we have announced in France, the fact that this quarter will be the quarter of deeper recapitalization has been because it has already finished well. The mid-corporate contribution, I think we can have another positive IB fee trend. Then if it is EUR 30 million, EUR 40 million , EUR 25 million is difficult to say because depends also when they materialize the net loss.

Very important is your second question because it gives me the opportunity to elaborate on this. What we have understood, given the moratoria and the new defaulted loan, we have understood that it was very important to facilitate, help clients to repay. And the collection process is done through our collectors, and it is also done by third-party collectors.

Collection has been greatly improved with new tools in terms of letting people to pay with a number of different payment system, which were not there at the time when lockdown materialize. So I am quite confident that even in case of new lockdown, we will not see neither the moratoria nor the nonpayment that we have seen in the past because of different operative system and tools for collection. Now this means that, as you said, we will be -- even in case of new lockdown, far from EUR 40 million per month. So it will be much lower.

The third point is the following one. There is an area of calendar provisioning which is not so clear, which is the so-called UTP classification. Now it is important not to have in this period some sort of automatism like, having a company, which -- let's assume -- let's make an example. Transportation or other businesses that are related to mobility but are operated by solid, very well-known listed company. They have much lower EBITDA, maybe 1/3 or even 1/10, and they may go to a certain leverage. It's very important that this important company, and which have a very important market position, and they, for sure, will survive. They should not be automatically reclassified into stage 3. Because in stage 3, then the possibility to help them, to give them more money is going to be more limited.

So I think it's important that if there is a durable, serious deterioration of risk, then you need to reclassify. But if it is a temporary situation, like lack of revenue because of lack of passenger or lack of clients, which normally will finish in some quarters, this is important for the economy that banks can continue to help without having the need, if they judge that it is appropriate to do this, to classify them as stage 3.

So it's a gray area, the one of UTP that needs to be understood a bit in the context of COVID. So because if we have a massive reclassification of UTP -- this is not going to happen this year. It's going to happen more in the next few years. Then there can be also an impact in the capital ratio.

[Operator]

We are now taking our next question from the line of Christian Carrese from Intermonte.

[Christian Carrese, analyst]

Congratulations from the results. My first question is on Corporate & Investment Banking, if you can elaborate a little bit on net interest income that went up in the quarter due to volumes. So what do you expect for the next quarters?

The second question is on the strategy. I read that you are saying that there are no asset up for sale in the Wealth Management business. But do you feel that current prices could be good prices to make a deal or still evaluation are too high?

And finally, your thoughts on M&A. Do you feel that at this stage, there could be any cross-border deal in Italy to help consolidation?

[Alberto Nagel, executive]

Thank you, Christian. On CIB, I think we have enjoyed slightly better margin, some interesting volume still have to come because some important acquisition finance have been postponed in terms of closing to the end of the year or to the Q1 of next year. So I think we will have some support from volume and also from marginality in the future.

Strategy, we see the opportunity to do some small deal, to do some top up. But still, we have to say that if we look at some target that are more interesting in terms of size, as we said, there is not a clear availability and/or possibility to conclude this. This is for the time being.

But as I said, the COVID just started, and the conclusion of this is still something that we have to understand over the next few quarters. So for this reason, we need to stay prepared. We need to stay prepared using our cash, possibly also Generali shares and Mediobanca shares. And for this reason, we may need a better trend because today, both Mediobanca and Generali shares are -- have been having quite an important impact in terms of valuation, while we can't say the same on to Wealth Management. But I would say that the price and valuation is important, but is come second compared to availability.

Cross-border deal, I doubt in the sense that -- well, it is more likely to see first some consolidation in Tier 2 in Italy and then see the biggest competitor in each country, trying to find a possible scheme of merger after. Of course, there can be -- we have read there can be cross-border in the sense that some foreign operator that are already successful here, they may try to increase their market share. This may be valid for some European banks that in Italy have a longstanding presence. If we mean by this, a large M&A between a large Italian bank and another non-domestic bank, I am more reluctant because I see more domestic consolidation as a priority.

[Operator]

We are now our next question from the line of Azzurra Guelfi from Citi.

[Azzurra Guelfi, analyst]

A couple of questions from me as well, and congratulations for the results that were very solid despite the macro environment. When we look at the Wealth Management, we see that there is a continued increase in the total financial asset. And how do you think about the evolution of deposit versus AUM in coming quarters, especially in case if there were another lockdown or significant impact from a second wave?

The second one is on capital. I've seen your updated payout guidance, and that is subject to the regulator. Would you think the regulator will go for a blank approach for all banks being able to return capital or there would be like a selection of banks that would be available? And in that case, what could be the, if you want, the metrics that the regulator would use? Would use just the capital buffer, the company profitability, the level of NPLs. I don't know. Wanted to pick your brain on that.

And then the third question is a slightly different one, and it's about ESG. Mediobanca had made a huge effort in terms of improving their ESG profile and have done a lot of initiative. You are one of the few CEO in Europe that actually share the ESG Committee in the Board and within the management. And so I wanted to know what are the main focus at the moment. And what could be, like, new initiative where you could further improve? I don't know, climate-related targets and things like that.

[Alberto Nagel, executive]

Thank you, Azzurra. If I have to say, COVID impact, new COVID impact, I would not say that is affecting much net new money on one sense, in the sense that we have experienced that with CheBanca! being brought online, they have all the tool to continue to engage and to raise new AUM even in the lockdown. This was -- we didn't lose money. We didn't lose any AUM. We increase the AUM. So normally, we will continue to grow.

Where we are not going to continue to grow at the same level, in the hiring of financial adviser. So this is -- this has an impact because most of the financial adviser, they like first to talk with a new employer but then to talk with their existing client before changing. So if there is a lockdown similar to the one we have had, not the one that we have today, I think we can have a slowdown in hiring financial adviser.

Capital and ECB approach. The way I have understood, ECB is still thinking about what to do and what can be done for the system in Europe. Their thinking and their approach, to my reading will be I need to understand the full impact of the recession and asset quality trend for you in the next few years in order to give you any authorization to pay dividend. Why? Because, of course, they want to see that banks may withstand an important shock if and when COVID impact is going to be that important. So they will try to do a stress test. They perform a stress test on each of us, asset quality-wise impact portfolio to understand the limit of each bank, and then decide if they may have a selective approach or they can -- they have to give a common guidance.

ESG. Yes, I chair the committee, and I like a lot to be involved in this. I see gender diversity for us a real priority. And we have been working a lot to put basically, in hiring and in promotion, rules whereby we can improve our gender diversity mix as of today.

The second is climate change where we are imposing basically quarter-on-quarter to every colleague to have certain kind of car and certain kind of use of green energy. So I would say that gender diversity and environmental problems are today the key focus for me.

[Operator]

We are now taking our next question from the line of Alberto Cordara from Bank of America.

[Alberto Cordara, analyst]

I join my colleagues in congratulating you for this very good set of results. Yet looking at the market, it doesn't seem to differentiate Mediobanca from the rest of the European banking space. So the question is that maybe the market is thinking that this good set of results may not be that recurrent. So I just wanted to understand from you if you feel confident that, particularly on the revenue line or on the cost of risk, these set of numbers can be replicated over the next few quarters.

And the other question related to the discussion that you previously had on the dividend payout that has been raised to 70%. If I understand correctly, but please let me know, that means that we shouldn't be seeing share buybacks for the remaining part of 2020 or 2021. And maybe the share buyback policy may resume in the fiscal year after this one. But I just wanted to know from you if this is -- could be the correct interpretation.

And in general, again, I'm just following the line of reasoning as far as I understood it. Why dividends should be more digestible to the regulator than, let's say, share buyback?

And finally, my very latest point is, I think you've been very clear, extremely clear on the risk that is posed by the procyclicality of the calendar provision set up. Yet, we know that for Mediobanca, this risk is mainly related to new UTP that we have yet to see, correct me if I'm wrong. Because a large part of your current portfolio, we should assume that you are able to bring it back to performing. And in that respect, I just wanted to ask if you can give us a bit of a time line when this existing UTP could move back to become performing again. And if the current COVID outbreak has by any chance changed this time line?

[Alberto Nagel, executive]

So in terms of recurrence of revenue and cost of risk, what can I add? I can say that we think that core revenues, so nonrecurring revenues, last year, we had, at the end of the year, some performance fees. Maybe this year, we will not have the same performance fee. But core revenue in terms of management fee, in terms of stream of CIB fees and stream of, I would say, also Consumer Banking fee are going to be quite on the good trend.

As I said, we should not consider this quarter as the quarter to be multiplied by 4. But we should not, on the other hand, think that we're going to go back to the COVID level or the quarter after COVID.

In cost of risk, I am even more convinced because, as I said, we are taking a margin of conservatism in consumer.

And coming to your last point, we have now concluded the recapitalization of Burgo. Burgo has been recapitalized by a private equity fund. And the loan has been renegotiated and refinanced through a new capital market, so to a new facility. So it definitely will go in the next few quarters in this year into volumes. This is an important event for us because it's like 1% in -- 0.8% in NPE ratio. So if we are today at 4-point something, we're going to be down to 3.4%, 3.5% only for that.

Payout, yes, for priority, our priority is to pay this year a dividend. Also, because this year, we couldn't put in the agenda any share buyback authorization because it falls into the year where buybacks and dividend are not allowed. So this means that for this year, unless we call another shareholder meeting, which is possible in 2021 before October, we are not having the possibility to buy back shares. So if we don't do it earlier, it will be more a 2021 post-October initiative.

I cannot elaborate, honestly, Alberto, on difference between dividend and buyback vis-à-vis ECB. So I think they may be considered pretty the same in the sense the use of capital that otherwise can be left to -- as a buffer against -- to do more lending or against some shocks. So I don't know if there is a nuance or a difference in their, I would say, treatment or in their consideration on -- between dividend and buyback.

[Operator]

We are now taking our next question from the line of Domenico Santoro from HSBC.

[Domenico Santoro, analyst]

Also thanks to Jessica for the level of details in the presentation. I do have a number of follow-up on the question of colleagues. First of all, on the NII, the first question. My understanding is that in -- I mean your comments were about the consumer credit before, bottoming out at the end of the year in terms of loan book or beginning of the next year. But there are always, I mean, other areas of the bank in which you'll do better. It might be the holding function in a quarter or CIB in the other quarters. So I'm just wondering whether we could consider this level of NII in a way, where you think that at group level will bottom out, also considering the other moving parts.

The second is on loan loss provision. My understanding is that now you are more optimistic. So the level for this year might land on 61, 62 rather than 83. But also this quarter, there were some write-backs. So I was just wondering if you land on 61, 62, that implies that you might have some sort of write-backs going forward in the CIB. Again, you were mentioning a big position before.

Then on the dividend and the buyback, you said you don't know whether the ECB might prefer one or the other. But in case the ban is lifted at the beginning of next year, so all the good banks, whatever, they pay a dividend, I'm just wondering what you would prefer to do given that now it's quite easy, if my understanding is correct, to call a general meeting. If there might be an extraordinary dividend or you might opt for a share buyback also given the comments on the valuation of the stock?

Then the cancellation of the shares, is it still related to a way to the ECB view on the dividend? Or there might be something on which you might probably do whatever if at the beginning of next year?

[Alberto Nagel, executive]

So on NII, Domenico, we need to -- in order to contain the, I would say, the decrease, we need to have consumer finance making volumes. Because we can soften the decrease through, as you said, holding function, CIB. Now we are working, as I said, that bond portfolio in order to counter this kind of trend. But we need, of course, that the faster, I would say, reaction of Compass is not halted or posed by a new lockdown measure.

Because the only point that we see in this new lockdown measure is not, as we said, in the cost of risk but is in the speed of new loan production. So if they start closing shops, closing commercial center, closing -- then the consumer behavior will be different. So we need to have -- we can -- with holding function, CIB, soften this impact, but we need to have a consumer that is available to print 1.5 -- on top of 1.5 of new loan every quarter.

Yes. On question number two, we think that the new cost of risk, even with the new lockdown, should stay more in the region of 60, 62, 63, 65. Now it's very difficult to say because it's only the first quarter, but we are quite positive on this.

Dividend buyback. As said, this year is -- the coming year is more the year of dividend also because we don't have the possibility to buy back shares. Now I think after having done -- given a guidance of 70% payout, it's difficult that we may be authorized in 2021 also to do a buyback because I think it will be, if any, a progressive, I would say, blending into the new normal.

This does not mean -- and in fact, I follow you, when you say in October 2021, we may go -- if everything is normalized, we may go to a general meeting asking to renew the authorization to buy back shares. And hence, I consider up to October 2021 more a dividend only, and after October '21, a dividend plus buyback option for Mediobanca.

Yes. We have already 3%. We have to cancel them, but we need to be authorized to cancel. This is the point. And if there is a ban, we couldn't be authorized to cancel. So we are a bit blocked on operative on buying back shares. But we think that this block or this ban may be canceled by the next general meeting.

[Domenico Santoro, analyst]

All right. So can I just get a clarification if I get on the dividend? I mean other banks, if the ban is lifted -- I repeat the same question I asked you, sorry, the last time that we met. I mean other banks, they might already pay sooner rather than later during the year, if, of course, this ban is lifted. So is there any chance that you might phase the timing of the dividend in a different way? When I say phase the timing, I mean, also, there is something that could be extraordinary. Or is something that is not even under discussion at this point?

[Alberto Nagel, executive]

I think, Domenico, honestly, we need to see the evolution of ECB approach in this. So I think it would be too soon to say, look, not only we may go to 70%, but we can also start to pay it during the year because I think it would be imprudent from our standpoint. So I think it's important to see from here to December when ECB will take a stance. After December, we may be more precise.

Thank you very much. I don't see any other questions. So thank you very much for your patience, your clever and sharp question, and hope to see you and to have you all in the next call. Thank you very much. Bye.

[Operator]

That concludes the call for today. Thank you for participating. You may all disconnect.