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Edited Transcript of BMPS.MI earnings conference call or presentation 9-May-19 11:00am GMT

Q1 2019 Banca Monte dei Paschi di Siena SpA Earnings Call

Siena May 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Banca Monte dei Paschi di Siena SpA earnings conference call or presentation Thursday, May 9, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andrea Rovellini

Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM

* Marco Morelli

Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director

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Conference Call Participants

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* Giovanni Razzoli

Equita SIM S.p.A., Research Division - Financial Analyst

* Hugo Moniz Marques Da Cruz

Keefe, Bruyette & Woods Limited, Research Division - Analyst

* Jean-Francois Neuez

Goldman Sachs Group Inc., Research Division - Executive Director

* Riccardo Rovere

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the MPS Group First Quarter 2019 Results Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Marco Morelli, Chief Executive Officer. Please go ahead, sir.

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [2]

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Good morning, everybody, and thanks for attending our Q1 results. I'm here with our CFO, Andrea Rovellini. Let me make a few introductory remarks before we step into a detailed analysis on numbers. As we always do, we look at our quarterly results. And this has been the case since we finally approved towards the end of 2017, the Restructuring Plan. We look at our numbers in the context of our Restructuring Plan. And therefore, we move in parallel -- we move forward 2 different lines in parallel, the relaunching and the consolidation of the commercial relaunch and margins for the bank and to follow shoots on every single restructuring commitments which, as you're aware of, are pretty stringent.

Our operating profitability is -- for Q1 is in line or slightly better than the average of the last 3 previous quarters. Q1 2018 was a totally different macro environment, and in parallel, we did have a few positive extraordinary. Therefore, the fact that Q1, in spite of a totally different macro environment, in spite of the fact that we continue to pursue full respects of our capital requirements and our liquidity ratios, and we do meet every single operating requirements of the Restructuring Plan, is in line, as I said, with the average of the other 3 quarter. By no means, we do consider that satisfactory. As I mentioned, when we presented year-end results, our aim is to get to year-end and close 2019 with better numbers than 2018. As you have seen in our press release, and we get into that in a while.

At Q1, we posted in Q1 a significant number in terms of extraordinary nonrecurring to nonoperating items in addition to the contribution to the SRF. We did have possibly the final step for provisioning related to the diamond business and that had an impact of EUR 47 million. We did have the SRF booked. And that's as -- as a matter of fact, a clear impact on our bottom line. We look forward for -- we look forward to coming quarters when the weight of nonoperating one-off -- negative one-off will heavily decrease.

Pillar #1 of our operating strategy is the reduction of the MPS stock. This is a trajectory which moves according to plan, and we do confirm the aim and the target of EUR 2 billion reduction in our gross UTP number. The aim, the targets, we are currently imposing ourselves is to get to something which is likely above 14% year-end. We currently stand at 16.2%.

And as I said, the other pillar is preservation of our key capital requirements ratios. Fully phased Core Tier 1 in total capital, which are slightly reduced compared to the end of 2018. Here, again, we do project the following quarters to improve in terms of -- slightly improve in terms of operations.

One final comment I'd like to make. As I mentioned during the AGM, this is an operating strategy which needs to fully take into account and factor in the stringent commitments we do have. In parallel, the Board and the management is clearly exploring and pursuing any possible, more vertical and comprehensive positioning in terms of the MPS strategy, i.e., go for something which is more radical in terms of reduction. And at the same time, we continue the so-called business model analysis to seek, gauge and assess to more extent. Our business model is sustainable, medium and long term, and to what extent the issue of size could improve the performance of Monte dei Paschi going forward.

Let me then step at Page 2 of our presentation, which is a comprehensive picture of key numbers. Pre-provision profit is EUR 233 million. That does not take into account the potential benefits, the cost of labor, which will impact in Q2 following the exit of 650 headcount we expensed and booked at year-end 2018. These are going to be effective from the end of March this year. Cost of risk is in line with year-end, cost of risk at 73 basis points. Another very relevant item here, we did book and factor in our cost of credit immediately the more adverse macroeconomic forecast in terms of potential credit recovery. And in this respect, we did book in excess of EUR 40 million in our cost of credit line to fully factor in the different macro projection in terms of GDP. Should we split out this number, our annualized cost of credit would have fetched 57 basis points.

Net income is EUR 28 million, strongly impacted, as I mentioned earlier, by an aggregate of EUR 92 million of nonoperating items, which includes, as I said, EUR 47 million additional charges for reimbursement of clients involved in commercial activities on the diamonds side.

Key ratios for our NPE position, 16.3% from 34.2% in Q1 '18. Net is 8.4%. Guidance and target, we do set ourselves, as we speak, is slightly above 14% at year-end. We get into more detail analysis of our UTP positioning in a while. Core Tier 1 and total capital are fully in line with the current well in excess of current requirements. And as far as liquidity ratios are concerned, we are still sailing in a pretty safe mood.

Moving to Page 3. Key items on our commercial lending and funding activity. Left-hand side, we do confirm the new mortgages flows rise, which pretty much matches what we had in the strongest quarter of last year, which was Q1. So we continue the focus on households, families and small business. And that I would like to stress, in spite of not only the negative macro environment but in spite of the fact that, as you know, we do have commitments in terms of new lending flows and related pricing as well. On the commercial funding side, we do continue the trajectory of growth of the new current accounts in the quarter, 12,000, and we increased direct funding in the quarter vis-à-vis of Q4 in excess of EUR 2 billion. We are currently launching and implementing in our network a new retail and small business commercial focus in terms of stronger grips to clients, stronger reach of our managers. And we are scaling back, as we did in the second -- since the second half of last year, the commercial activity on the large customer side.

Page 4, our UTP deleverage trajectory. Here, we do have what we have booked already, EUR 200 million amount of binding offers at the end of April, EUR 200 billion -- EUR 200 million. Nonbinding offers already received for EUR 1.1 billion, and EUR 300 million of multi-target, multi-originator deals. So we do have, in a nutshell, EUR 1.6 billion disposals in the pipeline with binding -- closing expected by half 1 of this year. And the same applies for the partial -- the consolidation on the gross bad loans. We did have an improvement of EUR 600 million vis-à-vis of Q4 in terms of reductions.

As I mentioned earlier, we do confirm the target of EUR 2 billion reduction of UTP on a stand-alone basis. So without considering any potential extraordinary transaction, and we should [see that].

Page 5, capital positioning. We have a buffer of 330 basis points versus the 2019 SREP threshold. We do have the trajectory of Core Tier 1 in total capital vis-à-vis of last quarter. Core Tier 1 is stable at EUR 8 billion Q-on-Q, including EUR 150 million to the phasing on IFRS 9 FTA. And then we have EUR 60 million -- roughly EUR 60 million of positive contribution for the -- on the reserves of euro govies and no-govies portfolio. RWA, but again, we'll get into that in a while are at Q-on-Q EUR 1.5 billion. And you have the explanation in the slide. Overall, and then I'll move to Andrea Rovellini before coming back for closing remarks.

Page 6 is pretty much the summary. There is one relevant message here. As you're aware of, we did have an ongoing on-site inspection on operating risks with -- we are focused on the legal risks ongoing when we presented year-end results back in February. As of today, so as we speak, after the exit meeting which took place at the end of April, no increase in provisioning for legal risks is expected during the year as a result of the ECB inspection. As you know, the process needs to be fully formalized. But this is, and I want to stress, as of today, this is what -- this is the outcome of the exit meeting with our regulator.

Andrea?

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [3]

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Thank you, Marco. Now we can go analyzing the single main line of our P&L, starting from the trend of the net interest income. Here, we have a reduction in comparison with the last quarter and the first quarter last year, but this is explained by the lower average volumes for customer (sic) [commercial] loans. On average, quarter-on-quarter, we are around EUR 2 billion less, and this is the effect of the concentration of the mortgage payment that was at the end of '18.

And then, a little pressure on the spread. We lose 3 basis points in comparison with the last quarter last year. However, during the quarter, the loan production dropped as the repricing of the new loans that we were able to grant in the quarter. And the new condition are around 40 basis points more than the average condition that we were able to perform during the last year. Now the spread is remaining stable, and this is something that with increasing amount of the average volumes can generate a positive sentiment in terms of strength for the next quarter.

Moving to page 8, fee and commission. Here, the performance of the net fees and commission is affected by the reduction of the asset management placement. We reached EUR 2.6 billion in the quarter as an improvement in comparison with the 2 previous quarters, but still below the average of last year. We are recording a more broad and prudent attitude of our customers -- for our investors, which saves comp. So our productivity, that is increasing in line with our expectations in terms of number of sales and in terms of number of relationship with the customer. But we are recording lower amounts than in the previous period.

(technical difficulty)

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Operator [4]

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Ladies and gentlemen, please hold the line. The conference will resume shortly.

Please go ahead, sir.

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [5]

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Okay. Thank you. That was an interruption.

I'll start on Page 10, analyzing the trend of the operating cost. Operating costs are stable quarter -- in comparison with the first quarter last year. So we have an organic headcount reduction that -- which left us with about 300 fewer employees. That was offset by, we can say, little and automatic salary adjustment linked to the actual -- so the last national collective agreement. We are expecting an improvement starting from the second quarter this year due to the exit of 650 employees, which took place on the last day of the quarter.

We spoke about the nonoperating items on Page 11. And here, we can -- we have to say that the provision for the intermediation of diamonds are based on our quarterly estimate that we do on the reimbursement and the requests from our customers. We have to adjust the estimate with the respect of the end of '18. And we helped -- we helped from the release of provision on signature loans and the release of other funds. So together with this increasing in provision and also the amount of that we set apart for the Single Resolution Funds, at the end, the overall cost for the nonoperating items reached EUR 92 million in the quarter.

Moving to the asset quality from Page 12 and ahead. We can say that all the comparison with the previous quarter are positive. We have reached a default rate in the quarter that is 1.3%; cure rate, 8%; danger rate in the area of 12%; and the recovery rate rise to 4%. We have already mentioned that the impact of the cost of risk deriving from the change in our estimate in -- estimation for the GDP growth for the next -- for this year and the next year. And then, we can analyze the reduction of the bad loans coverage that is associated to the effect in the first -- of the first tranche of the leasing bad loans disposal, while on the unlikely-to-pay, the coverage rises from 44% to 45%. The nonperforming loans ratio drops to (technical difficulty) to 16.3% from 17%. And as Marco said, we are expecting a decrease by another 2%, reaching the area of 14% as a result of the planned unlikely-to-pay disposal and the completion of the leasing bad loan disposal process for the year-end.

Now I can pass the managing of the discussion to Marco for the final...

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [6]

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I'll answer a couple of questions and then I'll have final remarks at the end. So please, feel free to ask questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Jean Neuez with Goldman Sachs.

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Jean-Francois Neuez, Goldman Sachs Group Inc., Research Division - Executive Director [2]

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I just wanted to ask about net interest income. At the beginning of last year, there was still a strong reduction in the cost of funding as per Slide 7. And since then, the cost of funding has no longer decreased all that much is actually picked up, it looks like a little bit on the stock. So I just wanted to have a sense of what is your outlook for the cost of funding from here. And what do you think your ability to pass this on is from here in terms of market dynamic, new lending, et cetera? So that's my first question.

And my second question is on the capital ratio. I just wanted to know whether you could summarize the expected regulatory headwinds over the course of the next -- over the next few years to see how net income and the interplay of that and regulatory headwinds affect your capital ratio projection.

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [3]

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Let me start, and then I'll pass to Andrea with a word on the cost of funding. As I mentioned at the very beginning, all things being equal, and with no unexpected headwinds for the year, our cost of credit could be in the area of Q1 normalized. Normalized means net of in excess of the EUR 40 million I referred to earlier, which are related to the impact on our model of the different GDP outlook. That means that tripping out this kind of impact, we would have landed in Q1 with the cost of credit of EUR 57 million. So slightly below EUR 60 million. We want to make sure that -- and as I said, everything which is under our control, in principle, we want to shoot for something which is between 60% and 70% year-end. But there, as you can expect, there are number of things that are not under our control.

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [4]

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For the trend of our risk-weighted assets, you can say that we are not expecting material changes this year. Also because we can manage the slight increase of our loan book maintaining the total amount of the portfolio in terms of risk in line with the results that we had at the end of the quarter. We can say that only starting from next year, we could have an increase that are coming from the applications that are now doing in order to adjust in -- the implementation of our internal models. And this is something that is specific for us because we have to modify our system in order to adjust and update the historical series.

And for that, we are considering that the possible -- the next year, we could have an increase that is around EUR 4 billion in terms of new risk-weighted assets. And the regulatory impacts for the next year are already factored in our Restructuring Plan, and we are confirming that we are in line, and in order to respect all of the SREP requirement that we have at the moment, not including any kinds of release for our requirement for the future.

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Jean-Francois Neuez, Goldman Sachs Group Inc., Research Division - Executive Director [5]

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On provisions, I must have made myself unclear. But I was actually asking about the cost of funding. Apologies for the confusion from my side.

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [6]

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For the cost of funding, at the moment, we know that this is the area for which we can have important improvement because of -- we are paying 15 basis points more than the average of the market. And this is the reason of the different mix in terms of customer distribution of our funding. This is an area for which we have to expect a reduction. But at the moment, with uncertain in terms of opening of the institutional market in terms of new funding that we can have for the future, we are maintaining, we can say, a prudent approach in terms of cost in order to sustain the average amount of volumes. So at the moment, we are not expecting important improvement for the next quarter, and we are expecting to maintain the cost in the area of 30 basis points.

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Operator [7]

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The next question is from Giovanni Razzoli with Equita.

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Giovanni Razzoli, Equita SIM S.p.A., Research Division - Financial Analyst [8]

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Three questions on my side. The first one, you've mentioned that you had an impact on the cost of risk because of the worsening of the market. I was wondering whether this is due to the IFRS 9 technicality. And you're the only one bank reporting such an impact, while -- I mean, the market environment is the same. So I was wondering whether in the future, all else being equal, are the other banks will have to take the same move. Or whether you may revise your assumption, because there has been really a material difference so far between you and the other banks.

The second question is on the SREP recommendation. I was wondering whether there are -- there has been, as I suppose, some follow-up discussions with the regulators regarding the request of increase in coverage to 100% in 2026. So whether they bought some arguments that you may have provided in terms of collateralization of your loan books, the coverage and so on and so forth?

And the final question, we read this morning on the press that there has been, say, process involving Sorgenia. I was wondering whether there could be any kind of capital release if the company was sold by either no reduction in the stake or thresholds or deduction on the capital.

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [9]

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Okay. Thanks, Giovanni. Let me start -- this is Marco Morelli, from the last question. The answer -- your last question. The answer is yes. By year-end, assuming the trajectory of the numbers of Sorgenia as the one we are seeing today, we can have a capital release.

Your second question, the answer is no. We did not have any additional inputs from our regulators on the 2026 loan book to reach potential additional provisioning.

And then your first question, I go back to what I said at the beginning. We want to -- our approach is -- and this is pretty much the way we feel a business like Monte dei Paschi should be run. In the current context and in the context of a pretty tough Restructuring Plan, and with lots of different tallies, gauging and assessing what we're doing is an approach which has to be very clearcut and transparent. So we decided that it was appropriate in the light of what happened since the end of 2018 and in the first 3 months of the current year to revise our cost of credit as an overall number, factoring in the downward forecast on GDP.

Now why others did not take such as that? I think the question should be asked to my equivalents in other banks.

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Operator [10]

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The next question is from Riccardo Rovere with Mediobanca.

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Riccardo Rovere, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [11]

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Just a follow-up on what Giovanni has just asked, which I think is -- I agree with him, is very interesting, the fact that you're the only one that, at least to my knowledge so far, has mentioned anything like that. I would be curious, just to have 100% sure understanding correctly that the 16 basis points is IFRS 9. Is the technicality of IFRS 9 plugged into the models, downward and revised GDP forecast?

And the second question I have is where does the 0.9% and the 0.5% GDP growth come from? Is your internal assumption is -- are you seeing very various sources? Where do this number come from?

And again to get back, shouldn't banks, according to IFRS 9, recalculate the expected -- the allowance for expected credit losses every single quarter? Or is something -- from an accounting standpoint, this is a question probably for Mr. Rovellini. From an accounting standpoint, aren't you obliged to calculate the expected credit losses every single quarter?

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [12]

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So the adjustment of the provision is something that each bank has to define. And we have to take in account the trend of the economy and the trend of the market price for the real estate, and a number of consideration in order to adjust the level of -- the probability of default and the LGD for the future. And this is something that is new for us. So -- and started from the first application of IFRS 9. So each bank has to define a scenario. We are considering at the basis of our evaluation, the -- all the activity and the scenario that are provided by -- [from that area].

And as you can imagine, it's not an easy job to identify the new level of the PD for the future in -- for all our loans in consideration of the new scenario. And -- but this is something that we can -- in terms of adjustment when there are significant movement in the expectation of the trend of the main factor of the economy for the future.

We have considered in the first quarter that we have this movement, and this is the reason why we have this kind of results. At the moment, the impact is distributed within the performing loans and those in the nonperforming. And the overall results is EUR 40 million for the reduction from 0.9% to less than 0.5% for this year. And also a reduction in terms of the expectation of growth for the GDP for the next year was recorded in our provision.

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [13]

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And just to make it clear, the EUR 40 million negative impact on our cost of credit line are -- related to what Andrea just explained, are in addition to the $92 million nonrecurring, nonoperating we talked about.

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Riccardo Rovere, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [14]

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Just to be 100% sure. Is the number EUR 40 million, sorry? Or EUR 14 million?

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [15]

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Four zero. EUR 40 million.

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Operator [16]

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The next question is from Hugo Cruz with KBW.

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Hugo Moniz Marques Da Cruz, Keefe, Bruyette & Woods Limited, Research Division - Analyst [17]

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I just wanted to ask about -- you gave the guidance of EUR 4 billion of volume growth for next year. If you look at consensus you're basically assuming flat year-on-year. Is there a function of volume growth, for example, you grew very strongly this quarter? Or can you split that between volume growth and regulatory headwinds, please?

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [18]

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These are results of the application of the improvement in the internal models for the identification of the credit risk together with some results from the TRIM activity. And this is something that we have to manage in order to analyze if our application is in line with the expectation of ECB. And this is something that could affect the risk weight and also the density of our loans in terms of risk, starting from the first and the second quarter next year.

The EUR 4 million -- EUR 4 billion is our expectation, and in this expectation, we are also considering the updating of all the historical series that we have to consider in order to define the right forecast in terms of the main factor for the evaluation of the credit risk.

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Hugo Moniz Marques Da Cruz, Keefe, Bruyette & Woods Limited, Research Division - Analyst [19]

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Okay. And so a follow-up. So I think you included the assumption on the waiver on LGD. I'm not sure if that can be revised because there's some change with the legal kind of framework. Do you -- are there any other potential mitigants to that or any kind of tailwinds to capture that we should consider? I'm thinking perhaps, an SME support factor or any kind of portfolio optimization you might do. Can you give us any guidance there?

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [20]

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At the moment, this is the -- our estimate for the existing loan book. We are moving -- increasing the secured part of our portfolio, and this is something that will link us to the credit part that we are performing in the last years. So also the increasing of the mortgages for the retail market is something that can change the loan mix for the future, and we can have some benefit from these different distributions.

In terms of waiver, we have to consider that the waiver that we receive is linked to the disposal of the bad loans under the Valentine transaction and then also from a part of the disposal of the leasing and a part of the disposal of the small ticket bad loans that we completed last year. At the moment, we have not any kind of differentiation in terms of regulation for the waiver, considering the disposal activity in comparison with the other banks of the market.

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Hugo Moniz Marques Da Cruz, Keefe, Bruyette & Woods Limited, Research Division - Analyst [21]

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Okay. So can you remind me then what's your CET1 target for next year?

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [22]

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No. We are not disclosing target for CET1. We can -- we are working in order to consider the right -- a right level of buffer above the requirement that we received from ECB.

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Operator [23]

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(Operator Instructions) The next question is a follow-up from Riccardo Rovere with Mediobanca.

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Riccardo Rovere, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [24]

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A completely different topic. Loan growth, you state that the weakness in NII was mostly due to lower average volumes. Now I was just wondering, let's say, loan growth it looks like is not going anywhere in any banks, at least the ones that reported so far. I was wondering whether it is -- there is no in the current economic environment, there is no way to grant new loans at decent prices, and hence, you prefer not to take on board any -- eventually any extra risk. Or was this your -- just your deliberate decision to try to keep risk-weighted assets under control as much as possible as so is an economic problem or is a deliberate decision from -- of MPS?

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Andrea Rovellini, Banca Monte dei Paschi di Siena S.p.A. - CFO & Acting Deputy GM [25]

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So starting from the last 2 years, we are putting a lot of attention in terms of risk-adjusted return for all the business in which we are present. We know that our area for which the RAROC, so the risk-adjusted return on the capital, is below our expectation of cost of capital. And this is something that is driving our approach for defining the credit policy year-per-year. So we have -- we know that at the moment, we have a room for increasing the loan book for the retail, for the mortgages market. And this is an area for which also the level of risk that we are managing is, we can say, in line -- historically in line with the average of the retail market. It's a question of price. But if we are able to add a number of product with the mortgage, we are able also to reach a level of return that is in line with our expectation for this kind of market.

Also small ticket is an area -- the small business is another area in which we have good return in terms of capital. We are decreasing our pressure on the last corporate, and we are maintaining a prudent approach for the SME, dividing the different sector of economy and also considering the trend of this vast cluster of customers for the future in terms of risk, in terms of possible growth.

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Operator [26]

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(Operator Instructions) The next question is a follow-up from Hugo Cruz with KBW.

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Hugo Moniz Marques Da Cruz, Keefe, Bruyette & Woods Limited, Research Division - Analyst [27]

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Just to -- can you remind me if you have any plans for further one-off redundancy charges, either in 2019 or 2020?

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [28]

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Sorry, Hugo, what kind of charges?

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Hugo Moniz Marques Da Cruz, Keefe, Bruyette & Woods Limited, Research Division - Analyst [29]

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Related to redundancies.

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Marco Morelli, Banca Monte dei Paschi di Siena S.p.A. - CEO, GM & Director [30]

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Okay. Okay. So the answer is, we do have nonrecurring extraordinary charges for redundancies every year throughout the plan. The impact on 2019 is lower than the impact of 2018 and 2017.

Before we end the call, I would like to make a few final remarks, and I would like to dwell upon one of the very last questions in terms of the way we manage our loan book and the way we manage -- in a way the way we manage our commercial effort overall.

I think we already stated very clearly that since inception of the plan, and since the beginning of last year, the beginning of 2018, the aim was, on the one hand, to preserve capital and liquidity, and therefore, move forward within the barriers and within the -- what has been paid by the Restructuring Plan, always looking after capital and liquidity in a much more stringent way that anybody else who does not have formal monitor commitments.

On the other hand, our approach, again, since we started getting back into the fray at the beginning of last year, was to make sure that our top line growth was sustainable. So quarters -- we might experience a slower pace of recovery of our top line. But in a way, let me say, this is deliberate. We want to make sure the trajectory and the progression of the bank is a sustainable one. And at the same time, and this is why we deliberately decided to post nonrecurring items or to be very conservative, for instance -- on what you just asked in terms of the impact on our model of the different, more negative macro environments, the way we treat provisioning. We want to make sure that we do have something which is sustainable, medium/long-term.

And at the same time, and I would like to leave you to -- with this message, making sure our people and our clients are fully focused on our growth along the lines I just described. And at the same time, the Board and the management is very engaged and very eager to explore any possible alternative route for -- on the one hand, the NPE portfolio reduction, and on the other hand, what kind of different environment and what kind of different business model and what kind of different size, mid-tier or second-tier related to size bank like Monte dei Paschi should have -- once you do project the business model, the return -- potential return on business model of a bank like Monte dei Paschi and the cost of the equity of a bank like Monte dei Paschi, you projected forward medium long-term.

So thanks very much for attending the call. As usual, the call -- as usual, we do welcome additional questions. Our team will be on roadshow next week, so please feel free to reach out and ask for additional detail. Thanks again.

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Operator [31]

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Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.