Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banca Monte dei Paschi di Siena (BMDPF, Financial) reported a net profit of EUR1.6 billion for the first nine months, a 68% increase compared to the previous year.
- The bank successfully finalized the sale of a EUR300 million NPEs portfolio, positively impacting its financial results.
- Gross operating profit increased by 14% year-on-year, driven by strong operating performance and effective cost management.
- The bank's common equity Tier 1 ratio stands at a solid 18.3%, positioning it at the top of the banking sector.
- Wealth management fees grew by 20% year-on-year, contributing significantly to the bank's revenue growth.
Negative Points
- Total net loans decreased by 2.1% compared to the year-end, reflecting weaker demand in a high-interest rate environment.
- Operating costs increased by 2.5% year-on-year, primarily due to the impact of labor contract renewals.
- The bank's net interest income is expected to decrease in the fourth quarter due to lower interest rates.
- The NPE stock showed a slight increase quarter-on-quarter, indicating ongoing challenges in managing non-performing exposures.
- Despite strong performance, the bank's guidance for 2024 remains unchanged, suggesting potential limitations in exceeding targets.
Q & A Highlights
Q: Your nine-month '24 results seem to indicate you are running ahead of your full-year guidance. Why leave the guidance unchanged, and what are the expected dynamics in Q4?
A: We are already at EUR1.1 billion pre-tax profit and expect to cross our original target of EUR1.3 billion. We anticipate the last quarter to be similar to the average of the previous three quarters. Regarding Anima, it's an interesting deal, but it's early to comment further.
Q: How should we think about the cost of funding and net interest margin moving forward? Have there been any one-offs affecting the cost of funding?
A: We continue to focus on optimizing interest expenses while maintaining a good level of deposits. The strategy involves shifting deposits to asset management, which is crucial for our activity. We aim to keep costs under control while preserving deposit levels.
Q: Can you share how many deposits have been switched to asset management products this quarter? Also, what is the trend behind the slight increase in NPL stock?
A: We reported a gross flow of EUR3.5 billion in asset management, with a net flow of EUR400 million. The NPL stock trend remains consistent with previous quarters, and we are reinforcing early warning monitoring to maintain asset quality.
Q: What are your expectations for net interest income (NII) and fees in the last quarter of the year and 2025?
A: We expect a decrease in commercial NII in Q4 but aim to maintain revenue levels through strong fee and commission growth. For 2025, we anticipate a decrease in NII due to interest rate trends but will focus on loans in energy and agrifood sectors to mitigate this.
Q: Could you provide more detail on the moving parts affecting NII in Q3? Also, what are your latest decisions regarding the replicating portfolio?
A: The total spread improved by 6 bps quarter-on-quarter, supported by liability remix. We are assessing the replicating portfolio option and will implement it when the curve normalizes.
Q: Given your strong capital position, are there any updates on potential partnerships or strategic moves?
A: We are focused on organic growth but remain open to capturing market opportunities. Our capital position allows us to explore potential strategic options.
Q: What is your guidance for 2024 pre-tax profit, considering the current trajectory?
A: We are confident in achieving a pre-tax profit of EUR1.4 billion for 2024, exceeding our initial guidance of EUR1.3 billion.
Q: Regarding the Danish compromise and internalizing the insurance business, what are your thoughts? Also, what is the expected tax loss carryforward absorption in Q4 and 2025?
A: The impact of the Danish compromise depends on the price of any potential deal. We expect to use EUR110 million of tax loss carryforward in the first nine months of '24, with further usage planned through 2028.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
