Trend & Outlook

The 2024 financial year has so far been characterized by an overall positive macroeconomic framework, despite the fact that significant elements of uncertainty remain, arising, in particular, from the international geopolitical situation and the persistence of restrictive monetary and financial conditions that could hinder the growth of domestic demand. In this context, the Group nevertheless recorded excellent levels of profitability, with profit before tax from continuing operations at € 1,925.7 million and with net profit at € 1,695.8 million. At the adjusted level, these results amounted to € 1,974.0 million and € 1,244.8 million, respectively.

 

During the first nine months of 2024, the Group continued the process of implementing the new configuration of product factories in the payment systems and Bancassurance segments.

 

On 30 September, the Parent Company, together with Numia Group, Gruppo BCC Iccrea and Fondo Strategico Italiano (FSI) finalized the transaction involving the strategic partnership, announced on July 14, 2023, leading to the creation of the second national player in the e-money sector.

The completion of the transaction took place following the obtaining of regulatory and legal approvals, with Numia Group S.p.A. (a company holding the entire capital of Numia S.p.A.) becoming 42.86 % owned by FSI and with Banco BPM S.p.A. and BCC Banca Iccrea S.p.A. each holding 28.57 %.

As part of the transaction, Banco BPM contributed to Numia the business unit consisting of: i) the set of assets, activities, liabilities, payables, receivables and legal relationships functionally organized to carry out the activity related to acquiring and issuing services of electronic payment instruments ii) the 100% stake in Tecmarket S.p.A. At the same time, Numia carried out a capital increase of € 500 million, excluding option rights, to be released against the above-mentioned contribution in kind by Banco BPM.

On the same date, Banco BPM sold its stake in Numia to Numia Group S.p.A., for a total consideration of € 500 million, of which € 228 million in cash and € 272 million through the subscription to a Numia Group capital increase, resulting in a 28.57% stake in the latter’s capital. The transaction resulted in the recognition of a capital gain in the income statement for the first nine months of € 500 million (€ 493 million net of specific applicable taxation).

 

With regard to the Bancassurance segment, the corporate reorganization had been completed at the end of 2023, with the completion of the sale and purchase transactions that had led to the Group’s total control of the companies operating in the life insurance sector (Banco BPM Vita, Vera Vita and BBPM Life) and to the participation with a 35% stake in the companies operating in the non-life insurance sector (Banco BPM Assicurazioni, Vera Assicurazioni and, indirectly, Vera Protezione) in a joint venture with Crédit Agricole Assurances.

In May 2024, in accordance with the agreements between the parties, the purchase and sale prices of the afore-mentioned stakes were adjusted on the basis of the final values of the companies’ own funds and accrued profits.

During the period, the internalization of the segment’s activities also continued, with the aim of achieving IT migration to a new technological platform during the next fiscal year.

 

With reference to the process of rationalization of its real estate portfolio, in September the Parent Company’s Board of Directors resolved on a securitization sale transaction (“Square” Project) of a portfolio of more than 330 properties owned for non-instrumental use, with a total book value of approximately € 295 million, at a price substantially in line with fair value. The sale will take place in several tranches, starting at the end of 2024, in favor of a securitization vehicle managed by Phoenix Asset Management S.p.A. and SPF Investment Management L.P., leading companies in the asset management and structured credit sectors, respectively. As a result of the afore-mentioned transaction, Banco BPM shall achieve, two years ahead of schedule, the targets for rationalization of the real estate portfolio set out in the 2023-2026 Strategic Plan.

 

Moreover, as regards the process of rationalization of its organizational and corporate structure, during the period, the partial spin-off transaction of Banca Akros in favor of Banco BPM was finalized, effective January 1, 2024, related 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, on June 25, 2024, the Parent Company and Banco BPM Invest SGR[1] signed the deed of contribution by which Banco BPM transferred to the SGR the business unit represented by the complex of assets and people pertaining to the “Alternative Investments and Funds” organizational structure, effective July 1, 2024.

 

Finally, it should be noted that, on June 28, 2024, the renewal of the Shareholders’ Agreement between Banco BPM and Crédit Agricole S.A. and Crédit Agricole Consumer Finance, relating to the Joint Venture in Agos Ducato, was formalized until June 28, 2029. As part of this, among other things, Banco BPM’s right to exercise its unconditional put option on 10 % of Agos Ducato’s capital was extended for another three years (with an exercise period from July 1-July 31, 2025 to July 1-July 31, 2028), at an exercise price already agreed at €150 million.

In addition, the new Shareholders’ Agreement simplified the potential listing process of Agos Ducato, through the stipulation of a single procedure that can be activated at Banco BPM’s request from July 1, 2025, until the expiration of the Shareholders’ Agreement.

 

With regards to the derisking process, agreements were finalized during the first nine months for the sale of € 620 million of nonperforming exposures (increased by a further € 40 million in October), laying the foundations for the achievement of the target of disposals for a total of € 700 million envisaged over the Plan period.

 

On the funding and capital operations front, in the first nine months of 2024 the Parent Company concluded three issues, reserved for institutional investors, under the Euro Medium-Term Notes Program: the first in January 2024, relating to Green Senior Non-Preferred securities in the amount of € 750 million, fixed coupon of 4.875% and maturity six years callable from the fifth year; the second in March 2024, relating to Tier 2 subordinated securities in the amount of € 500 million, maturity ten years and three months, fixed coupon of 5% until June 2029 and repayable in advance from the fifth year; the third on 2 September 2024, regarding Social Senior Non-Preferred securities in the amount of € 750 million, maturity six years, fixed coupon of 3.875% and possibility of early redemption in September 2029.

In addition, during the period Banco BPM concluded two issues of European Covered Bonds (Premium) aimed at institutional investors: the first in January 2024 in the amount of € 750 million and maturity six years, the second in May 2024 in the amount of € 500 million and maturity seven years. Both transactions are part of the € 10 billion BPM Covered Bond 2 program.

Finally, in July 2024, the Parent Bank completed the issuance of a € 400 million Additional Tier 1 capital instrument with perpetual maturity and callable from January 2031. At the same time, Banco BPM launched an offer to repurchase a perpetual bond with a nominal value of € 400 million, which ended with a subscription of € 179.5 million. It should also be noted that Banco BPM, in June 2024, proceeded to the early redemption of an Additional Tier 1 capital instrument issued in 2019 for a nominal € 300 million and already subject to partial repurchase in November 2023 for € 223.3 million and, in September 2024, decided to exercise and early redemption right of the Tier 2 bond issued on 1 October 2019 with a maturity of ten years.

 

Last update: 6 November 2024

[1] The company in March 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.

The macroeconomic picture for the first nine months of 2024 moved in relative continuity in the third quarter as well, although incorporating in Europe a slowdown in the German economy grappling with difficulties in some key sectors (e.g., automotive). For Italy, expectations remain moderately positive, with inflation declining further and GDP growth positioned between 0.6 % (Bank of Italy) and 0.8 % (Confindustria), compared with a figure of 1 % reported in the Structural Budget Plan prepared by the government. Confirmation of the expansionary policies initiated by the ECB is expected to give a positive stimulus to investment growth and to a boost in exports.

 

In this context, the Group’s ordinary operations are evolving positively. On the funding side, current accounts and deposits continue to hold up well, with a forecast of stability or slight growth also for the last quarter: the much lower than expected recourse to restricted and onerous forms of funding and the switch to indexed deposits is providing a progressive benefit on the cost of funding, which is expected to continue in the last quarter. On the lending side, after the slowdown in disbursements in the first half of the year, there are signs of recovery in July and October (particularly in mortgages to households), which, with progressively more favorable interest rates for investments, could lead to less discontinuous growth trajectories in the months ahead. At the overall level, net interest income is expected to confirm an improving trend compared to 2023, benefiting from a higher average level of rates over the 12 months as a whole, in comparison with the previous year.

 

On the commissions front, the trajectories followed so far confirm the expected year-on-year growth supported by growing volumes of financial assets referable to customers, which will be able to benefit from a positive market effect, as well as from the recovery of net inflows; the positive signals coming from disbursements also hint at a positive outlook for other forms of commissions, despite the gradual fading of the contribution of the Ecobonus component. Also positive is the contribution expected from Life Bancassurance, which, after having benefited in the third quarter from the evolution of the rate scenario, is expected to draw possible benefits also from the upswing in placements recorded since September.

 

Operating expenses, which have seen a very favorable dynamic in the nine months, are expected to continue in a stable manner and in line with expectations also in the last part of the year, while on the side of personnel costs there could be further non-repeatable provisions linked to the potential conclusion of negotiations with the trade unions on the activation of a new redundancy fund, which – if an agreement is reached – could deploy positive effects from 2025, both in terms of generational turnover and at the income statement level. With regards to administrative expenses, the higher burden resulting from the implementation of the initiatives outlined in the new Strategic Plan is currently more than balanced by the effect of the optimization measures and the positive dynamics of operating expenses, the trend of which should be confirmed in the latter part of the year as well. With reference to credit, the quality of the portfolio and the steady reduction in the NPE ratio suggest an improving annual trend with respect to 2023. In this context, caution shall anyway remain high on the front of credit policies, oriented to a careful selection of customers, just as coverage levels shall l remain substantially stable at precautionary levels on both performing and nonperforming exposures.

 

Fully consistent with what has been anticipated so far, the solidity of the results achieved and the resilience of the same despite a context of falling rates, lead us to be confident in the achievement of the EPS forecast of 95 eurocents (1.15 euro considering the one-off components that can be hypothesized at present) and in its possible exceedance. In the light of the trends described above and the ability to generate stable increases in profitability and organic capital creation, all the profit and capitalization targets announced in the last Plan are confirmed while, with reference to the payout, the approval by the Board of Directors of the proposal to pay an interim dividend of € 40 cents per share, which took place today, makes it possible to ensure shareholders a total distribution of € 1,450 million during the calendar year 2024, € 150 million higher than the one originally assumed at the time of the Strategic Plan, strengthening the confidence in the possibility of exceeding the total shareholder remuneration target of € 4 billion cumulative over the period 2023-2026.

 

Last update: 6 November 2024