Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Credito Emiliano (FRA:EAO, Financial) achieved a record net profit of EUR 324 million in H1 2024, marking its best result ever.
- The company reported strong asset quality with an NPL ratio below 0.8%, better than the Italian average.
- Credito Emiliano's CET1 ratio stands at 15.72%, providing a buffer of 812 basis points above regulatory requirements.
- The bank's business model shows excellent diversification, with significant contributions from various revenue streams, including wealth management and private banking.
- Credito Emiliano has successfully expanded its customer base to over 1.5 million, with a 6% growth over the last 12 months.
Negative Points
- The economic environment remains uncertain, with potential challenges from declining interest rates impacting future profitability.
- Operating costs have increased due to higher labor contract costs and IT project investments.
- Short-term loans are experiencing a decline as companies adopt a wait-and-see attitude amid high interest rates.
- The bank's sensitivity to interest rate changes indicates a potential negative impact of EUR 65 million if rates decrease by 100 basis points.
- Despite strong capital generation, the current payout ratio is lower than the industry average, raising questions about future capital allocation strategies.
Q & A Highlights
Q: What led to the positive trend in assets under management in Q2, and what impact do you expect from Basel IV in 2025?
A: Angelo Campani, General Manager, explained that the focus on strengthening private banking and consultancy contributed to the positive trend in assets under management. Alessandro Cucchi, Co-Vice Central Director, added that the overall impact of Basel IV is estimated to be about 60 basis points, with 50 expected in 2025 and 10 in 2026.
Q: How do you expect declining interest rates to affect your Net Interest Income (NII), and what is your sensitivity to rate changes?
A: Alessandro Cucchi noted that a 100 basis point increase in rates would positively impact NII by EUR112 million, while a decrease would reduce it by EUR65 million. The bank manages interest rate risk through natural hedging and derivative positions.
Q: With a strong capital position, do you plan to increase your payout ratio, or will you retain capital for potential growth?
A: Angelo Campani stated that the dividend decision is made by the Board towards year-end, balancing shareholder rewards with maintaining a strong capital position. The current dividend level could be a starting point for potential improvements in 2024.
Q: Can you update your guidance on NII for 2024, and how do you see loan demand evolving in the second half of the year?
A: Angelo Campani mentioned that the guidance for NII remains between flat and minus five, closer to zero. He expressed confidence in loan volume growth due to the bank's strong positioning and product offerings, despite a challenging market environment.
Q: What is the average maturity of your term deposits, and how will you manage them with changing interest rates?
A: Alessandro Cucchi stated that the average maturity of term deposits is about five months. The bank expects term deposits to decline in the coming months but will remain flexible in their use, depending on market conditions and customer preferences.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
