Trend & Outlook
The first half of fiscal year 2023 was characterized by a more reassuring macroeconomic scenario on the growth front compared to forecasts for the latter part of 2022, despite the fact that elements of uncertainty remain, also as a result of ongoing inflationary dynamics and the consequent repercussions on the international economic system.
Against this backdrop, the Group reported a profit before tax from continuing operations of € 1,015.6 million, representing the best half-year result, and a net profit of € 624.4 million. Excluding non-recurring items, net income stood at € 652.3 million.
During the period, the Group continued with the process of integrating the insurance business begun last year with the acquisition of control of the companies Banco BPM Vita and Banco BPM Assicurazioni and with the finalization of an agreement with Crédit Agricole Assurances to launch a commercial partnership in the Non-Life/Protection sector.
In this regard, it should be noted that, on March 7, 2023, the Banco BPM Group obtained recognition by the European Central Bank of its status as a financial conglomerate pursuant to Directive 2002/87/EC, which was the pre-condition for being able to access the benefits of the prudential treatment of equity investment arising from the application of the so-called “Danish Compromise,” currently being assessed by the competent Authorities.
On May 29, Banco BPM exercised the purchase option, provided for in the agreements signed in 2021 with Cattolica Assicurazioni, on 65% of the share capital of Vera Vita S.p.A. and Vera Assicurazioni S.p.A., insurance companies, respectively operating in the life and non-life businesses, in which Banco BPM already owns a 35% stake.
More specifically, the purchase of the 65% stake in the capital of Vera Vita will be made directly by Banco BPM Vita, while the stake in the capital of Vera Assicurazioni will be purchased directly by Banco BPM and subject to simultaneous resale to Crédit Agricole Assurances.
The completion of the acquisition of control of the Vera Vita and Vera Assicurazioni companies is indicatively expected in the last quarter of 2023, subject to the issuance of the prescribed legal authorizations by the competent Authorities.
It should also be noted that, following the resolution passed on April 18 regarding the project to enhance the value of the e-money business, on July 14 Banco BPM, Gruppo BCC Iccrea and FSI signed a binding agreement for the establishment of a strategic partnership aimed at developing a new Italian and independent reality in the digital payments sector. The agreement provides for the contribution of Banco BPM’s e-money activities to the BCC Pay S.p.A. joint venture with recognition of a mixed consideration in cash and in shares issued by the Pay Holding vehicle, which in turn controls the entire capital of BCC Pay S.p.A.. Upon completion of the transaction, Pay Holding will represent the second player in Italy in the payments business and will be owned about 43% by FSI and about 28.6% each by Banco BPM and Iccrea Banca. The Agreement also provides for the signing of a multi-year distribution contract for the Company’s services on Banco BPM’s network as well.
The overall valuation of the Banco BPM branch has been determined at € 500 million at closing, which may grow to € 600 million with a significant benefit on capital ratios.
Completion of the transaction, subject to approval by the relevant authorities, is expected in the first quarter of 2024.
On the funding front, in January the Group successfully completed a new issue of Green Senior Preferred securities intended for institutional investors in the amount of € 750 million and maturing in four years.
In addition, on 7 June 2023 Banco BPM completed a further Green Senior Non-Preferred issue reserved for institutional investors, with a maturity of five years and the possibility of early redemption in June 2027, in the amount of € 750 million.
Both bonds are part of the Euro Medium-Term Notes Program and are aimed at financing and/or refinancing Eligible Green Loans, as defined in the Bank’s Green, Social and Sustainability Bonds Framework.
Finally, it should be noted that at the end of June Banco BPM concluded the first European Covered Bond (Premium) issue in the amount of € 750 million and maturity of 5 years under its Guaranteed Bank Bonds program.
During the period, Banco BPM also concluded a program to purchase no. 2,418,855 treasury shares (equal to 0.16% of the outstanding ordinary shares) and a countervalue of € 10 million to service short- and long-term incentive plans to employees. Following the conclusion of this program, taking into account the allocations made during the first half of the year and the other treasury shares already in the portfolio, Banco BPM directly owns no. 6,979,418 shares, equal to 0.46% of the share capital.
On July 28, the results of the EU-wide stress test conducted by the EBA were released. Banco BPM performed better than in previous years despite a more severe macroeconomic scenario, confirming its ability to generate value in the base scenario and withstand significant shocks in the adverse scenario.
Finally, on the ratings assigned to Banco BPM, it should be noted that, on 30 June 2023, the rating company Moody’s Investors Service improved the Outlook of Banco BPM’s main ratings from Stable to Positive, also confirming the ratings assigned. The Outlook improvement reflects an upward pressure on Banco BPM’s ratings that is based on the assumption that the achievement of the strengthened profitability and stronger capital position will remain sustained in the future.
Last update: August 2023
The general picture continues to be conditioned by inflationary dynamics while showing first signs of a slowdown in the non-energy component.
Against this backdrop, the Italian economy, after the strong growth recorded in 2022 and the moderate expansion in the first quarter, has recently been showing the first signs of slowing down, also discounting the effects of a monetary policy that remains restrictive but sees less likely further tightening interventions between now and the end of the year.
Given this context, exogenous variables again appear to be the main influence on the Group’s operating performance in this fiscal year.
Net interest income will continue to benefit from the increase in short-term rates, particularly in the commercial matrix component, thanks mainly to a funding mix that allows repricing effects to be contained.
Commissions, while still discounting a framework of potential volatility affecting in particular those related to investment products, will continue to benefit from the dynamics of those related to typical commercial banking activities.
The trend in operating expenses remains under control, being one of the main areas of focus for managerial action. Moreover, the estimates prudentially discount dynamics related to inflationary pressures, the renewal of the national collective contract for credit workers and the effects of the investment policy to support the evolutionary initiatives envisaged in the Strategic Plan.
The dynamics of default flows, which are stable and below forecasts, show a picture of overall resilience of the national economic environment of which, however, a possible worsening in the latter part of the year cannot be excluded as a result of economic developments. The approach to credit will consequently remain prudent, with solid levels of coverage, confirming the rigorous assessments adopted in recent years on both performing and nonperforming exposures.
For the full year, the Group’s net income is expected to improve significantly from last year, with 2023 EPS of 80 cents, further strengthening for 2024, significantly exceeding both the profitability trajectory and overall targets outlined in the Strategic Plan, which will be updated in the fourth quarter of 2023.
Shareholder remuneration targets will be updated at that time, which may reflect the positive results achieved in terms of profitability and organic capital creation.
Last update: August 2023