Trend & Outlook

The start of fiscal year 2024 was marked by an overall positive macroeconomic environment, despite the fact that elements of uncertainty persist, arising, in particular, from the geopolitical situation in Ukraine and in the Middle East and the resulting difficulties on global supply chains. Against this backdrop, the Group registered record levels of profitability, with income before tax from continuing operations of € 661.7 million and net income of the period of € 370.2 million.

 

During the year, the implementation of the new configuration of product factories in the Bancassurance and Payment Systems segments shall continue.

 

For the Bancassurance segment, at the end of 2023, the purchase and sale transactions were finalized that led to the current corporate configuration with the Group’s total control of the companies operating in the life business (Banco BPM Vita, Vera Vita and BBPM Life) and the participation in a joint venture with Crédit Agricole Assurances via a 35% stake in the companies operating in the non-life business (Banco BPM Assicurazioni, Vera Assicurazioni and indirectly Vera Protezione).

For the current fiscal year, it is planned to continue the path of internalization of the segment’s activities with the aim of achieving IT migration to a new technological platform during the next fiscal year.

 

For the payment systems segment, following up on the agreements signed last year for the establishment of a joint venture with FSI and Iccrea, talks are underway with the supervisory authorities for the issuance of all the required authorizations, with the aim of reaching the closing of the transaction during the second half of the year.

 

Again with reference to the process of rationalization of its organizational and corporate structure, during the quarter the partial spin-off transaction of Banca Akros in favor of Banco BPM was finalized, effective 1 January, 2024, relating to the business unit consisting of the complex of assets and resources organized to carry out the “Proprietary Finance” activities of Banca Akros.

In addition, in March, the subsidiary Banco BPM Invest SGR received authorization from the Bank of Italy to carry out collective asset management and portfolio management activities pursuant to Article 34 of Legislative Decree No. 58 of 24 February 1998.

 

On the funding and capital operations front, in the first quarter of 2024 the Parent Company concluded two issues, reserved for institutional investors, as part of the Euro Medium-Term Notes Program: the first, in January 2024, relating to Green Senior Preferred securities in the amount of € 750 million, maturity six years and fixed coupon of 4.875%; the second in March 2024, relating to Tier 2 subordinated securities in the amount of € 500 million, maturity ten years, fixed coupon of 5% until the fifth year and repayable in advance from the fifth year.

In addition, also in January 2024, Banco BPM completed the placement of a new issue of Covered Bonds (Premium) aimed at institutional investors in the amount of € 750 million and maturing in six years under its € 10 billion Covered Bonds program (BPM Covered Bond 2).

 

Last update: 7 May 2024

Economic performance in the first months of 2024 has confirmed good overall resilience, despite the persistence of geopolitical crises: the latest forecasts outline steady (albeit weak) growth in the Eurozone for 2024, which will find more vigor in 2025. For Italy, expectations are slightly more optimistic than those formulated at the beginning of the year, particularly on inflation and GDP growth, now positioned between 0.9% (Confindustria) and 1 percent (DEF). Unlike the U.S., in Europe, the gradual return of inflationary pressures makes it likely that the ECB will begin a phase of monetary easing from June 2024, with scenarios of official rate cuts that can be assumed to proceed cautiously.

 

On the funding front, it is plausible to expect deposits to hold up well, despite the expected pressure generated by government bond issues. The scenario of slow but gradual decline in market rates could reduce competitive pressures on funding and, consequently, make recourse to captive and onerous sources of funding less significant than expected. The slowdown in lending will be persistent for much of the first half of the year, while signs of tangible recovery may become apparent in the second half, with interest rates more favorable to investment. At the overall level, net interest income is still expected to show a positive trend compared to 2023, benefiting from a higher average level of rates over the 12 months as a whole than in the previous year.

 

On the commissions front, after a very solid first quarter, the year-on-year growth trend is expected to continue supported, on the investment side, by growing assets that will benefit from a positive market effect in addition to the potential recovery of net inflows. On the other hand, fees related to credit operations are expected to be stable.

 

Operating expenses will continue to be stable and in line with expectations in the second quarter as well, while starting in July the possible positive outcome of the ongoing negotiations with the labor unions could lead to positive effects in terms of personnel cost containment. On the administrative expenses front, the higher burden resulting from the implementation of the initiatives outlined in the new Business Plan should be fully offset by the effect of the optimization measures, the benefits of which should materialize starting in the last quarter. With reference to the cost of credit, its evolution will depend mainly on the trend of default flows; where these flows remain stable at the levels recorded in this first part of the year, it will be possible to confirm an improved trend compared to 2023. The Group’s lending policies will in any case remain prudent, with careful selection of customers; similarly, coverage levels will remain stable at precautionary levels, confirming the rigorous assessments adopted in recent years on both performing and nonperforming exposures.

 

For the full year, the solidity of the results achieved, together with the positive outlook, lead on the one hand to reaffirm all the profitability and remuneration targets for shareholders and, on the other hand, to highlight possible margins for improvement in the EPS forecast of 90 euro cents net of nonrecurring components (>1.1 euro considering the one-off components that can be assumed at present); this forecast will be updated when the half-year results are presented. In light of the trends described above and the ability to generate stable increases in profitability and organic capital creation, all profit, payout and capitalization targets announced in the last Plan are confirmed.

 

Last update: 7 May 2024