Trend & Outlook

The first part of the 2024 financial year was characterized by an overall positive macroeconomic environment, notwithstanding the fact that elements of uncertainty remain arising, in particular from the geopolitical situation in Ukraine and the Middle East and the resulting difficulties on global supply chains. Against this backdrop, the Group recorded excellent levels of profitability with a profit before tax from continuing operations of € 1,241.8 million and net income of € 750.1 million. At the adjusted level, these results are even stronger: profit before tax from continuing operations of € 1,266.7 million and net income of € 776.1 million.

During the first half of the year, the Group continued the process of implementing the new configuration of product factories in the Bancassurance and Payment Systems segments.

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

During the first half of 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.

In addition, the internalization of the segment’s activities continued during the first half of the year, with the aim of achieving IT migration to a new technological platform during the next fiscal year.

With regard to the payment systems segment, following the agreements signed last year for the establishment of a joint venture with FSI and Iccrea, which has taken the name Numia, the completion of some preparatory activities for the finalization of the transaction as well as the obtaining of all authorizations from the competent Authorities make it possible to confirm the closing by September 30, 2024.

Also 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 January 1^st, 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 25 June 2024, the Parent Company and Banco BPM Invest SGR[1] signed the deed of contribution of the business unit represented by Banco BPM’s “Alternative Investments and Funds” structure, effective 1 July 2024.

 

Finally, it should be noted that, on 28 June 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 28 June 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 1 July–31 July 2025 to 1July–31July 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 to be implemented at Banco BPM’s request from 1 July 2025, until the expiration of the Shareholders’ Agreement.

In terms of funding and capital operations, in the first half 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 Non-Preferred securities in the amount of € 750 million, fixed coupon of 4.875%, and maturity of six years, recallable as 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 3 months, fixed coupon of 5% until June 2029 and repayable in advance from the fifth year.

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 maturing in six years, and the second in May 2024 in the amount of € 500 million and maturing in seven years. Both transactions are part of the € 10 billion BPM Covered Bond 2 program.

Finally, on 9 July 2024, the Parent Bank concluded a new issue of a € 400 million Additional Tier 1 capital instrument with perpetual maturity and callable from January 2031. At the same time, Banco BPM announced an offer to repurchase a perpetual bond with a total outstanding nominal amount of € 400 million (ISIN XS2089968270), which was concluded on 17 July with an adhesion of € 179.5 million. It should also be noted that in June 2024, Banco BPM proceeded with the early redemption of an Additional Tier 1 capital instrument issued in 2019 (ISIN XS1984319316) for €300 million nominal and already subject to partial repurchase in November 2023 for €223.3 million.

 

Last update: 6 August 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 February 24, 1998.

The macroeconomic picture in this first half of 2024 has confirmed for the Eurozone a trend of moderate but steady growth. For Italy, expectations are also positive, with contained inflation and stable GDP growth, now positioned between 0.6% (Bank of Italy) and 0.9% (European Commission). Following the easing of the cost of money implemented in June by the ECB, the second cut expected between September and October is expected to further boost investment growth and export momentum.

On the funding front, the excellent resilience of deposits, despite the intervening issues of government bonds, suggests a situation of stability or slight growth for the second half of the year as well. The competitive dynamics observed in the first part of the year now suggest that the use of tied and onerous forms of funding for the private segment as well as on the corporate side will be much less significant for the remainder of 2024, while the use of index-linked forms of remuneration should provide a progressive benefit on the cost of funding. On the lending side, the slowdown in disbursements lasted for most of the first half of the year, but clear signs of recovery emerged towards the end of the first half and in July, which, with more favorable interest rates for investment, could gain momentum in the second half of the year. At the overall level, net interest income is still expected to confirm a positive trend over 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 excellent six-month period just closed provides more support for the year-on-year growth expectations supported, on the investment side, by growing volumes that will benefit from a positive market effect as well as the potential recovery of net inflows; the recovery of disbursements should also revive commissions related to lending operations.

Operating expenses are expected to continue in a stable manner and in line with expectations in the second half of the year as well, while on the personnel costs front there could be additional non-repeatable provisions related 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 unfold, starting from 2025, further positive effects, together with those expected in connection with the incentive retirement initiative launched, both in terms of generational turnover and in terms of the profit and loss account. Regarding administrative expenses, 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, after a six-month period that closed at the lowest levels in recent years, thanks to a default rate still below the 1% threshold, 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, however, caution remains high on the credit policy front, oriented toward careful selection of customers, just as hedges will remain stable at precautionary levels on both performing and nonperforming exposures.

Fully consistent with what was anticipated in the first quarter, the solidity of the results achieved, together with the positive outlook, lead to further raising the profitability and remuneration targets for shareholders for the entire year and to identify a new EPS forecast of 95 eurocents net of non-recurring items. In light of the trends described above and the ability to generate stable increases in profitability and organic capital creation, all the profit and capitalisation targets announced in the last Plan are confirmed while, with reference to payout, the prospect of disbursing an interim dividend of € 600 million[1] – corresponding to 50% of the amount expected for the full year 2024 – lays the groundwork, together with the successful disbursement of a coupon of approximately € 850 million relating to the 2023 financial year, to exceed the total shareholder remuneration target of € 4 billion cumulative over the 2023-2026 period.

 

Last update: 6 August 2024

[1] The amount of the interim dividend will be determined by the Board of Directors on November 6 when the consolidated results as of 30 September 2024 are approved.