Unicredit Aktie

Good morning, ladies and gentlemen. Before I hand over to Ms. Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded. Madam, you may begin.

Good morning, and welcome to UniCredit's First Quarter 2026 Results Conference Call. Andrea Orcel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano Porro, our CFO. As always, please limit yourself to 2 questions. With that, I'll hand over to Andrea.

Thank you, Magda, and good morning, and thank you all for joining. I would like to begin today with a shout out for our people, our performance and progress are driven by direct execution every day. UniCredit has consistently demonstrated the ability to adapt throughout its transformation initially primarily focused on efficiency and profitability through Unlocked.

The results speak for themselves. 20 consecutive quarters of outperformance with net profit growing from EUR 1.5 billion to EUR 10.6 billion throughout the rate cycle while dedicating on average, EUR 1 billion per year in transformation investments. With Unlimited, we entered a new phase, more ambitious, more demanding, requiring us to push the boundaries of both efficiency and growth, sustainably gaining market share in our core market in the right segment and on the right terms.

Unlimited is raising the bar further. It builds on our strengths while demanding from all of us a step change in mindset, execution and ambition. We are off to a strong start with another record quarter with net profit 16% ahead of last year, fueled by strong core revenues complemented by equity investments and continued cost reduction. Our focus is clear: quality and consistency in our core business while transforming to be future ready. In organic opportunities, we remain add-ons, never a substitute for or distraction from our base performance. Any view that external noise will disrupt our delivery, underestimate our discipline, our focus, and above all, our people.

Turning to Slide 1. Today, I am proud to present our first quarter results, the first quarter of UniCredit Unlimited, the 21st sequential record quarter and best quarter in UniCredit's history. Unlimited is off to a flying start. We are executing at speed across both dimensions of our strategy, acceleration and transformation. We continue to drive quality growth across our business while further improving efficiency and investing in our people, technology and AI as key enablers of future change. This is what makes our trajectory distinctive. We are not choosing between short-term results and transformation to become future-ready, we delivered both.

Strong core revenues propelled by robust commercial dynamics and complemented by equity investment more than offset the decline in rates, proactive Russia compression and a more even quarterly distribution of loan loss provisions. Continued transformation supported yet another sequential quarter of cost reduction.

Combined, they translated into record gross operating profit, record net operating profit, record net profit and record return on tangible equity. This is not momentum by chance, it is momentum by execution. Because of the strong start, the strength of our business, our lines of defense and the ability of our people to perform across different macro scenarios. Today, we're not only confirming our ambition, we're upgrading it.

We expect net profit to reach at least EUR 11 billion in 2026, and we recommit to our '28, 2030 net profit ambition. We have taken into consideration the currently expected impact of a more challenging geopolitical and macro environment. Our story remains Unlimited. Anything inorganic will be managed with the same discipline we have always applied and only in a way that can further improve our stand-alone baseline.

Slide 2. From the outset, we said that Unlimited would build on the momentum of Unlocked by pushing further, moving faster and raising our ambition again. To go beyond the boundaries of legacy banking to be able to compete and win against fintechs, hyperscalers and any new entrant. Unlimited is about rewriting the rules of the game. It is about reimagining what a bank must look like, challenging, our digital models and artificial limits and recognizing that the greatest risk is not change but standing still. That is why Unlimited is a new blueprint for the future, combining the strength of a traditional bank, the agility of a fintech and the dynamism of a technology company. And this is exactly what we're doing now.

Slide 3. Unlimited acceleration. Our franchise is accelerating decisively. We delivered 7% revenue growth, excluding Russia, which we are compressing, absorbing rate decline and 5%, including Russia. We continue to invest in our people, the true engine of our success, hiring around 1,400 colleagues, around 90% of them in the business.

We are growing the balance sheet in a disciplined way with customer loans up 6%. We are acquiring targeted clients with SME, private and wealth up 2%, while total financial assets, excluding deposits are up 3%. And we are improving the quality of our revenues, maintaining the profitability of our capital deployed while further strengthening our fee base with one market funds increasing 9% in the quarter.

Slide 4. Unlimited transformation. We continue to further reset the efficiency from tier, starting from a position of strength, best-in-class capital and operational efficiency, Unlimited is allowing us to shift gears again. Our operational efficiency is further improving from an already unmatched position. Costs are down 2%, excluding new perimeters, 1%, including them.

Our capital efficiency remains top tier despite headwinds. The result is a bank that is leaner, faster, closer to clients and more efficient.

Slide 5. UniCredit Unlimited is not about incremental improvement. It is about rethinking the operating model at its core, with new technologies and AI as key enablers of that shift. We're deploying AI at speed with multiple AI-driven solution already in place across all our regions. Each one of them leading change in an area, together underpinning tangible improvement in client experience and productivity.

Our group AI platform already ensures approximately 35% lower time to delivery and 30% lower IT costs. This platform is the key enabler of our bottom-up approach, countries lead innovation close to clients. And once value is proven, the most successful use cases are scaled across the group.

We're decisively progressing across AI-powered service channels, next-generation virtual assistance, predictive analytics for tailored solutions, smart recommendation for advisers, upgraded tools further empowering our people. Somewhat similarly to AI, digital assets and the required transformation that goes with them will dramatically change the way we do business. With the creation of our digital asset hub, the objective is clear: move beyond pilots and make digital assets scalable. That is why we invested in Block Invest and continue to explore unchanged settlement solution, including Qivalis, which is continuing to get more traction in the industry.

Slide 6. First quarter performance matter yet another record in UniCredit history. Our strong core revenue performance complemented by equity stakes more than offsets Russia and LLPs headwinds. On a comparable basis, excluding these effects, gross and net revenue grew by 7%, core net revenues by 2%. Costs continued their gradual decline, further improving our already best-in-class operating leverage.

As a result, gross operating profits and net operating profits both increased 12%. Net profit increased 16% to EUR 3.2 billion, 22% excluding Russia compression, at a best-in-class return on tangible equity of circa 26%, 2 percentage points better despite our significant excess capital.

Our EPS grew 20%, DPS 12%, tangible book value per share 17%. This confirms the strength of our underlying business, our continued transformation and the quality of our execution.

Slide 7. Revenues are up 5%, driven by an acceleration of our core business, up 3% excluding Russia, and the returns from our equity investments. NII remains resilient down 2% year-over-year and flat sequentially adjusting for the day count.

Our core lending and deposit business absorbed around EUR 100 million of rate headwinds and EUR 30 million from Russia compression. This is the result of strong commercial dynamic with loans up 6%, deposits up 5%, 6%, excluding Russia and pass-through further improving.

NII RoAC remains above 20%, underscoring our ability to grow while maintaining our discipline. Fees and net insurance continued to benefit from our highly diversified product factories and grew 8%, 9%, excluding Russia, increasing their shares of net revenue by 2 percentage points to 38%. Our equity investment complemented well our strong core business dynamic. Overall, our revenue base is higher quality, more diversified and better balanced.

Slide 8. Net revenues grew 3%, 6% excluding Russia, absorbing what we expect to be a more evenly distributed cost of risk in the year. Cost of risk remained low and in line with our ambition. Our overlays are unchanged at EUR 1.7 billion, preserving a significant buffer to bit mitigate future pressure on cost of risk or further support profitability. Asset quality is strong and improved in the quarter. Net NPE at 1.4% is down 0.1 percentage point. Coverage ratio at circa 46% is up 2 percentage points, default rate at 0.7% is down 0.6 percentage points. The consistent quality across portfolio demonstrate prudent origination, robust underwriting discipline and tight monitoring.

Slide 9. Efficiency continues to be a defining strength and Unlimited intent to push it further. Costs were down 2%, excluding new perimeters, 1% stated despite inflation and continued investment in people, technology and AI. Our cost/income ratio improved to 33% remaining best-in-class. Our gross operating profit reached a record combining the highest revenues with the lowest costs in our history. This is exactly what resetting the efficiency frontier looks like.

Slide 10. Capital efficiency remains top tier despite headwinds. Organic capital generation in the quarter amounted to EUR 2.9 billion, 98 basis points, more than covering distribution accruals and regulatory and other impacts. The higher-than-expected consumption from equity investment is due to a temporary impact from the increase of Alpha and Commerzbank equity value triggered by their 2025 net profit, which will be reversed once the 2025 share buyback and dividends are executed in '26.

Once the accrued distribution are executed, we expect a 19 basis point CET1 benefit leading to a 10 basis point CET1 beat versus expectations. Pro forma for Danish compromise, our CET1 would stand at around 14.8% and at circa %, considering the 19 basis points equity investment capital absorption reversal.

Slide 11. Italy confirmed its role as a quality earnings powerhouse, delivering 44% of group net profit, while executing UniCredit Unlimited at speed. Italy showed clear signs of acceleration with loans up 5% and deposits 6%, reflecting continued acquisition of quality clients and strong transactional activity in the right places and at the right term. This commercial strength supported a resilient and increasingly high-quality top line. Core revenue increased 1%, while revenue decreased 1%, largely due -- while trading decreased 1%, largely due to balances affecting one-off.

Net interest income declined 4% year-over-year due to rates, but grew 1% sequentially. The NII RoAC stood at 23%, confirming disciplined pricing and capital-efficient balance sheet usage, notwithstanding strong growth.

Cost of risk remained stable and structurally low at 25 basis points. Fees and net insurance grew 9%, reaching 48% of net revenue, up 4 percentage points. Investment and insurance were up 5%, financing 6%, payments 3%, and client hedging in this environment 36%, highlighting deepening client relationships in this challenging environment.

Italy is gaining market share in most targeted segment with 2,500 new SME clients. Costs were down 1%, driven by non-HR down 2%, while continuing to invest in growth and transformation. Cost to income remains record at 33%, RoAC was circa 31%, best in the country. AI impact is becoming visible.

Beyond efficiency gains, 2 initiatives are worth mentioning, Gen AI use cases in buddy support advisers improving speed, consistency and quality of service. Virtual corporate branch launched expanding digital capability while reducing operational workload for our people.

Slide 12. Germany confirmed its role as a resilient anchor for the group, delivering 23% of the group net profit, while executing UniCredit Unlimited at speed. It is delivering today, focusing on its core business, while at the same time, transforming to be future-ready and win tomorrow. Germany showed clear sign of acceleration with loans up 3% and deposit 5%, supported by targeted client acquisition and growing penetration in priority segments.

Commercial momentum supported the resilient top line despite rates decline. Revenue grew 2% driven by core revenue, up 10%. Net interest income increased 8% with NII RoAC up 1 percentage point, up 19% confirming a structurally sound and capital-efficient lending model. Cost of risk at 23 basis points reflect an expected more uniform provisioning throughout the year, and a prudent approach with all asset quality metrics improving.

Fees and net insurance grew 13% and now represent 37% of net revenue, up 4 percentage points. Financing was up 24%, investment 12, payments 9 and client hedging 2% off a very strong base, highlighting strong client activity and franchise momentum in more challenging time with [indiscernible] benefiting from close client proximity to deliver tailored financing and hedging precisely when market condition demanded.

Costs decreased 5%, driven by non-HR costs down 11% while continuing to invest decisively in transformation. Cost income declined 3 percentage points to below 35%, confirming best-in-class operational efficiency. RoAC above 24% remains the best in the country. Germany aims to sustain this trajectory with continued transformation, leveraging significant past and future investment and 100-plus AI use cases.

Slide 13. Austria confirmed its role as a resilient anchor, delivering 14% of group net profit, while executing UniCredit Unlimited at pace. It showed renewed commercial momentum with loans up 5% and deposit up 2%, driven by profitable market share gains, particularly in corporate lending. Revenues decreased 2%, mainly driven by a decline in equity investment contribution, while core revenue increased 4%.

Net interest income increased 1%, supported by volume growth and disciplined pricing. NII RoAC increased 1 percentage point to 16%, confirming sound focus on quality. Cost of risks remained negative at 16 basis points, thanks to continued write-backs.

Fees and net insurance grew 7%, reaching 32% of net revenue, up 3 percentage points. Investments were up 12%, client hedging 17% and payments 3%. Cost decreased 4%, driven by non-HR down 6%, while continuing to invest in AI and people training. Cost income declined 0.5 percentage point to below 38%, confirming best-in-class operational efficiency in the country.

RoAC reached circa 27%, reaffirming Austria's position among the most profitable bank in the market. Austria remains at the forefront of group's innovation. As an example, this quarter, it developed several AI agents in credit analysis, generating a 50% productivity uplift, and rolled out AI-enabled sales training for relationship managers supporting scalable capability building.

Slide 14. CEE confirmed its role as the group's growth engine delivering 18% of group net profit, while executing UniCredit Unlimited at speed. CEE showed a strong acceleration with loans up 12% and deposits 8%, driven by robust client acquisition and SME growth. Revenues increased 4%, driven by core revenue up 6%. Net interest income grew 3%, supported by strong volume and pricing discipline with NII RoAC at 23%. Cost of risk increased to 16 basis points as write-backs are normalizing with asset quality remaining resilient.

Fees and net insurance grew 12%, reaching 31% of net revenue, up 3 percentage points. Investments are up 25%, financing 17%, payments 9%, confirming strong client engagement across the region. Cost decreased 1%, driven by non-HR down 4%, while absorbing inflation and investments.

Cost-to-income reached 33%, down 2 percentage points, confirming operational excellence. RoAC over 23% confirms CEE's structural superior profitable growth profile. CEE continues to invest to transcend transformation boundaries through scaling AI-driven digital sales journey and further simplification of processes end-to-end across payments, lending, account services and KYC automation.

Slide 15. Client Solutions continued to be a core pillar of group's capital-light growth, powering the quality and resilience of our top line. Client Solutions generated EUR 3.3 billion of revenue, up 3% and EUR 2.4 billion of fees and net insurance up 11%. Performance was broad-based across all product factories. Corporate Solutions delivered resilient revenues with strong momentum in advisory and financing, confirming our leadership in corporate bonds and financing activity across core European markets.

We maintained top-tier position in trade and correspondent banking in every country we operate. We continued innovating client risk management with visible results. Individual Solutions delivered strong growth. Investment increased 6%, supported by continued expansion of our offering led by 1 market. Insurance revenue grew 18% as we further internalize the value chain and deepen client engagement. Payment Solution remains solid while driving innovation with enhanced transaction service across geographies. Revenues were up 2%; and related fees, 5%.

Slide 16. When you step back and look at these results on a relative basis, the message is clear. Our leadership is confirmed with our relative gap further widening across most key dimensions, and we are aiming to go further transcending boundaries.

Slide 17. Our equity story is compelling. We are showing visible progress on both revenue acceleration and transformation offering a superior combination of growth at high return on tangible equity and distributions. Because of this strong start, the strength of our business, our lines of defense untouched, and the ability of our people to perform across different macro scenarios. Today, we're not only confirming our ambition, we are upgrading it.

We expect net profit to reach at least EUR 11 billion in '26, and we recommit to our net profit, '28, '30 ambitions. Putting noise aside, Commerce Bank offer outcomes can only further improve the story.

Slide 18. After 20 consecutive quarters of quality profitable growth under Unlocked, we entered Unlimited at pace with another record quarter. We have strengthened our leadership across the metrics that matter the most, and we continue to offer the best combination of growth at higher RoTE and distribution in the sector.

Our '25, '28 EPS CAGR is 16%, dividend per share 15% and our 2026 cash yield almost 6%, all achieved despite strong investment in transformation and protected by the highest lines of defense in the sector. And yet, we continue to offer an attractive entry point.

We are operating in an increasingly volatile environment. Slide 19, sorry. We're operating in an increasingly volatile environment with emerging macro concern around growth, inflation and credit cycle. We are well prepared to deliver Unlimited and continue to outperform, thanks to our continued transformation, idiosyncratic strengths and well-established lines of defense.

Our top line is resilient. NII will benefit from any rate increase, which, together with a keen focus on margin will help mitigate any slowdown in loan growth. For UniCredit, specifically, our loan focus is on gaining share in targeted areas, and that also helps mitigate possible headwinds.

Our diversified fee engines are more resilient in a volatile environment. Our cost dynamic will benefit from our starting best-in-class position and transformation levels already expense, which will help us even in a more inflationary environment. Asset quality remains robust, coverage solid and increased and our leading overlays remain untouched at EUR 1.7 billion.

We are closely monitoring our portfolio exposed to spillover risk in a prolonged war scenarios and do not observe signs of deterioration, while our exposure to private credit is very limited and largely within the European Union.

Both profitability and distributions are protected, supported by all levers above as well as our excess capital. We believe AI gives us additional upside at least in the short to medium term with potential to improve both revenues and costs, widening the gap versus laggards.

Slide 20. Let me close with a clarification on the potential outcome of Commerzbank. That is an offer that is officially starting today and will remain open for 6 weeks. As a regulatory matter, the offer is for 100%. It is a sensible and pragmatic mechanism to overcome the provision on the German takeover law, but would require us to make a mandatory offer where we need to go above a 30% shareholder.

This is particularly important in an environment in which Commerzbank share buyback scheme is creating instability and uncertainty. Our approach remains disciplined and fully focused on value creation, above and beyond Unlimited, which is a high bar. If we do not acquire control as a result of the offer, the expected scenario to date, but status quo works well from our point of view. We expect return to remain well above 20%, with in Commerzbank is encouraged to improve its performance initially with momentum. And now with momentum 2.0 that we will witness on Friday. We feel well protected on the downside given our put option, and we preserve full strategic flexibility.

If we were to acquire control, our intention is to implement this only, and I underline that, only if returns are superior to our cost of equity and hence, add to Unlimited trajectory. We consider both scenarios a clear win for UniCredit shareholders as they can only improve our best-in-class equity story.

Before opening to questions, let me leave you with 5 key messages from today's presentation. First, UniCredit Unlimited is already delivering at pace, both on acceleration and transformation. Second, Q1 is the 21st record quarter sequentially and a strong beat across the board, driven by our core business, complemented by equity stakes. Third, our transformation to future-ready is accelerating -- is accelerated by AI. Fourth, we are upgrading 2026 net profit ambition and recommitting to '28, '30 net profit ambitions. And finally, we offer the best-in-class combination of growth at high return on tangible equity and distribution with Commerzbank a positive add-on across all outcome.

Before I open to questions, as I may not have the opportunity to do that later, I would like to announce that Magda, the person who has kept us on track, on time and occasionally slightly nervous about both, is going to be stepping down from her role. Over the past 5 years, her hard work and dedication to explaining and championing UniCredit Unlocked had been incredible. And now having settled us into our first quarter of Unlimited, so comfortably she's heading back to her roots in Canada.

We wish you the best with your new coffee venture, bringing through the world. She leaves IR to in good hands and Iacopo Dalu, whom all of you know, will be stepping up to be as Interim Head of IR. Magda, thank you for everything, and Iacopo, good luck.

And now on to questions.

[Operator Instructions] The first question is from Noemi Peruch of Morgan Stanley.

I have two. One -- and the first one is on Generali. What rationale or scenario will lead you to increase the stake above 10%. And my second question is on capital. in the context of the 12-month period you mentioned before reconsidering perhaps pursuing the control of Commerzbank should they tender offer not granted? Will capital relief should we expect from SRTs? And what other capital efficiency measures could you implement to replenish capital as you execute the share buyback.

So let me answer on Generali and then Stefano will take the second question. At the moment, we don't see scenarios that would bring us above 10%. We -- Generali, the financial investments, we have stepped up the dialogue on cooperation that adds value to both sides in asset management, in insurance and in a number of our areas where we can create value for both. We like status quo. We're happy with status quo, and the stake we have helps us stabilize the situation indirectly. But our exposure is well below 2%, and we intended to keep it that way as of now.

So in relation to trend of the capital. So let's talk from arctic credit portfolio management action. So we're expecting to generate around EUR 10 billion of risk-weighted assets in 2026 deriving from arctic credit portfolio management action. Part of this already executed in Q1. Around 2/3 of this is via securitization fundamentally synthetic, so SREP and 1/3 of this is via getting collateral focus on EVA negative transaction. We are expecting to be able to have even a higher generation of risk-weighted assets from arctic credit portfolio management action in '27 and in '28.

One important element for the capital trajectory in 2026 is on one hand, the Danish compromise. So we have allotted the expected benefit of the Danish compromise. This will also -- on one hand, we will have a benefit on the capital. On the other hand, we will have an increase of risk-weighted assets of around EUR 6 billion. And then in the second part of this year, we will also have model changes for an amount between EUR 6 billion and EUR 8 billion, primarily in Germany and in Italy, that is something to be factored in.

The next question is from Britta Schmidt of Autonomous Research.

On the outlook and the guidance, which you've tweaked upward despite a very strong Q1. How do you think about this conceptually? Are you making any changes to the constituents of that outlook? Or can you confirm then or shall we interpret this as basically leaving a buffer in terms of any of the other constituents change a little bit. You talked about weaker volumes, for example.

And the second question would be on the net interest income. I mean what we're seeing is not a parallel shift in the curve, but more an increase in the shorter end, while the ECB has not yet raised rates. What sort of impact would that have on your NII trajectory for this year and maybe also 2027?

Thank you, Britta. So let's be clear, if we look at Q1 and if you look at April, there is no real change, i.e., the acceleration of the franchise is kept up. And what you have seen in the first quarter on NII trajectory, on fees trajectory, on costs is holding up. Obviously, every quarter is different. Not every quarter is like the first one, but there is no material change to date. That does not mean we are not prepared for one, it means when we look at it, we don't see it.

Now if there is a situation that maybe is more similar to the one we had when Russia invaded Ukraine, so a further decrease in gross inflation, potential increase in rates as the ECB has signaled that they will do so, the composition of our core revenues will shift.

This is one of the reasons why we indicated we didn't want to guide separately on all NII fees, net insurance separately, but as an aggregate because they're also revenue and depending on the macro and on the environment, they evolve differently. And the team can drive one more versus the other depending on what is in the best interest of UniCredit. So we think that the core revenue dynamics, so NII plus ESMA net insurance, for the time being, we don't see it affected materially, but that may change. But over time being, as of today, we don't see it affected.

The composition would change because of what I just said. Below the revenue line, obviously, the equity contribution you can drive that from your expectation on Commerzbank and Alpha. And the -- obviously, we had a more than EUR 100 million benefit from the -- from positive on trading in hedges that is not recurrent.

Cost, I think we are committed to a trajectory of continuous, gradual, not disruptive improvement. So you should continue to expect that we will grind down. And by having taken disproportionate integration cost last year, we can afford to grind down and to accelerate the grinding down to deliver what we want to deliver. And therefore, all of that, together with the fact that our NPEs are down, our coverage is up, and our overlays are untouched, allows us to be relatively comfortable on what we can achieve this year and therefore, on the bottom line. Some of the composition will change, but I think less than people expect. If we then transition into '27 and '28, I do believe that if this current environment continues, the composition will change probably less volume, more margin on NII, different factories in fees performing better than other factories.

Costs continued to decline, but we don't think that, that is going to be overly disruptive. Now I think -- and obviously, cost of risk increase, which at the moment, we see no indication of. We have our overlays and our coverage ready to absorb that and that has been the reason why we kept on where they are. I'll pass to Stefano on NII.

So absolute net interest income, which are the assumptions for rates, we're assuming deposit facility rate at 2.5% by year-end i.e., 50 basis points more than the current one. These, and then flat during the course of '27 and '28. This is fundamentally then translating with a EURIBOR average for the year of around 2.3% and something between 2.5% and 2.6% for '27 and '28. This is going to have a positive impact on net interest income.

Our net interest income sensitive is confirmed. So plus 50 basis points is around EUR 300 million of net interest income. So if you would like to keep, let's say, rate flat at 2% is 50 basis points less that is equal to EUR 300 million top line, but for the bottom line is around EUR 200 million. So all in all, it's something that it's not very meaningful for the overall trajectory of the group in '26 and '28.

The next question is from Andrea Filtri of Mediobanca.

First of all, would like to thank Magda and congratulations to Iacopo. First question is on the Danish Compromise. Danish competitor last week said that they expect Danish Compromise approval from the ECB in Q2. When do you expect your application to be approved? And could you treat the Generali stake under the Danish Compromise squared treatment, and sorry, just a follow-up on that. Can you clarify where your Generali stake is at? I heard you saying 2% before, but the line wasn't great. And I was reading headlines from the Generali AGM quoting UniCredit close to 9%.

Second question is on Commerzbank. What is your assessment of the shareholders overlap in UniCredit and Commerzbank, meaning investors that hold both shares. If these shareholders all tendered the Commerzbank shares during your offer, would you reach control of Commerzbank?

Always interesting, Andrea. So on Danish Compromise, we do not speculate, but we are conservatively assuming that the Danish Compromise approval would arrive in between the second -- the end of the second and the third, okay? But it depends on ECB and we don't speculate, but that is the case. What about the Danish Compromise squared for the Generali stake, we do not think that, that is applicable. We believe that the Danish Compromise applies only and will be applied only upon reaching control, and therefore, stakes do not fall into it, not even the in "squared." So yes, our stake is around 9%. And yes, I confirm that. It will climb as shares, both in the share buyback gets canceled.

CBK, shareholder overlap is significant. But we have also witnessed a reduction of certain shareholders that are overlapping with ours in Commerzbank, not in us. And therefore, it's very difficult to answer your question, I would love to be able to do so, but I would say that if all the shareholders had overlap, which is an assumption were to convert, we would get significantly above 30%, very significantly above 30%, given that the overlap is significant.

The next question is from Antonio Reale of Bank of America.

It's Antonio, Bank of America. I had 2 questions for me, please. The first one is on your structural hedge portfolio. This quarter, you've added another EUR 8 billion-or-so to your portfolio. You've guided to about EUR 400 million NII delta in the contribution this year, which looks increasingly conservative now when you have EUR 211 billion at the back book yield of around 1.5%. If I understand it right, your exit maturities are likely to be still near 0 or in any case, well below the book yield. And if I look at the current euro swap curve, why wouldn't the NII contribution be much higher than EUR 400 million. So that would be my first question.

My second question is on the use of capital. You're generating something like 400 basis points of organic capital a year, which is, I mean, a big number. Your CET1 ratio this quarter, I think you're saying it's 14.8% pro forma for the Danish Compromise, but it's actually 16.4%, if I also add the buyback that you've deducted, which considerably could be also used towards M&A. I don't know to put it, it's a bit like going around sort of shopping with a lot of cash in the wallet. The more you have, the more the market would expect you to spend it. Now, I've heard your remarks on cost of equity, but can you remind us sort of your priorities on the use of this capital, please? Also conscious that, I mean, loan growth seemed to have really turned the corner for this quarter.

So I'll start with the second question, Antonio, and then I'll pass the first to Stefano. So on the second question, we have been steadfast in telling everybody since this management team took over in 2021 that our priority, and I would say, 110% focus is on strategy and implementation unlock before Unlimited now. So this is where we spend most of the time. I know that M&A is seductive, but we spend all of our time in trying to deliver quarters like this one again, and again, and again. And we believe that, that sustainability, and if we can now convert it in organic market share gains at the right pricing in the right segment, that is the greatest value we can generate for shareholders.

So if I go back to your question on capital. Priority 1 is supporting that growth. That does not mean derailing any capital return because actually, we are demonstrating that we can do it without reducing our distribution.

Second priority is it depends. Either we have inorganic opportunity that beats the cost of equity. And I keep on saying it and people tell me, but the shareholders of the target one more. Yes. But the duty of this management team is to our shareholders, not the shareholders of the target, which incidentally, as Andrea just mentioned, are in large part our shareholders as well.

So we will be steadfast in our discipline that if we do not have something that exceeds the cost of equity, by enough margin to justify the risk, we will distribute in dividends and in share buyback. And obviously, if your scenario were to be correct and we accelerate the capital generation, therefore, there is more than we're expecting at the moment.

And we do not find inorganic opportunities that beat that. We will increase our distributions as we have always done. I think if you go back on 5 years, a lot of speculation we've never let anyone down on one performance and to capital distributions. So there will be more organic capital generation, and the business can grow organically easily without restriction, then and we don't have inorganic that beats our cost of equity. We will distribute and distribute and distribute. And that is the equity story. I'll pass it to Stefano.

Yes. So for the hedging on the deposit, so let's start from the size. The size -- the average of Q1 was EUR 211 billion, and we have reached around EUR 216 billion at the end of the quarter. There is few billion more that we can do, but not meaningfully, unless the deposits are going to increase meaningfully. Fundamentally, the contribution is dependent from the overall level of the rates.

Currently, we are expecting to do the rolling in era of 2.8%, 2.9%. What is important to be considered you're right. So our average duration is around 5, but we have, let's say, some position rolling that are more short term, with yield was good.

So the topic is currently average is 1.5% of the overall hedging. The contribution that we are expecting in terms of improvement on the net interest income for this year is something more than EUR 400 million. We don't believe it's going to be meaningfully more than EUR 400 million, but it's going to accelerate in '27 and '28. So around EUR 450 million in each of these 2 years. And one important point, this is not the end. So these will keep ongoing also during the course of 2029 and 2030 with a similar contribution, an increase of net interest income in '29 and 2030 as well.

The next question is from Delphine Lee of JPMorgan.

My first one is on -- just on NII. I mean we've seen really good, I mean, long volume growth. But the NII seems to be lagging a little bit. So maybe can you just elaborate a little bit if we are seeing a bit of sort of margin pressure? Or is this volume growth being achieved a little bit at the expense of margins? Because you can because of the cost of risk overlays. And my second question is just sort of going back to the question of M&A. I know at the moment you're very focused on Commerzbank, but there's more and more noise around M&A in Italy. Just wanted to know if you have any kind of updates on the situation on the golden power requirements and your thoughts about -- are you feeling like you're missing out on Italy or not?

So I'll start with M&A and then I'll pass to Stefano. So on M&A, I think, we think the following. Number one, we believe that the situation around the cold and power is resolved. Number two, Italy as a banking market, not as fragmented at Germany, but is fragmented. We have a second bank. We have a market share below 10%. And therefore, it is a market that will consolidate over time.

So while we have no pressure to intervene because we reach scale and create synergies through the entire group and Italy is only 45% of the total. As a player in Italy, we obviously observe the environment and are attentive to opportunities of consolidation. As we have done already twice, actually, more than twice, but twice public, we will not move or we will not go to the end unless we exceed our cost of equity by a margin. But we're probably in one of the better position to look at what is happening and intervening if and when there is an opportunity to do so.

So I would just feel that the missing out on Italy would be a voluntary missing out if returns do not match our cost of equity or if it would destroy value for shareholder. In other opportunities, we will be attentive to them.

With respect to NII, I think that -- but that's a more generic answer and Stefano will go in detail. We don't see any margin pressure. Actually, our margin is improving, not the opposite. The issue that is "polluting" NII trend is the extent of rich normalization impact on NII, which, as you know, in Italy, our biggest market is quite significant. So we are absorbing that. And secondly, the compression of Russia, where, as you know, it's a big NII contributor as we deposited the excess liquidity at the Central Bank. And now we're compressing that aggressively and that is a lot of NII as well.

So actually, the market share we're gaining is, a, done without reducing margins or aggressively pricing; and b, very importantly, because it is focused on the segments we talked to you about, i.e., consumer small corporate, micro businesses where margins are higher, the net-net on our book is an increase in margin, for example, in Italy, not to decrease in margin. In average jurisdiction that is less so, but the similar dynamics apply.

So some data points for you. When you look at the trend of net interest income, Q1 versus Q4, there is a reduction of EUR 40 million, 4-0. However, the Russia part of that is EUR 30 million. So EUR 30 million out of EUR 40 million. And then there are day differences for around EUR 40 million. So if you adjust for the day differences of the 2 quarters and Russia, the net interest income is higher in Q1 than Q4. So net interest income trend of Q1 is good for the group.

In relation to the client spread, so the client spread of the portfolio went up for a couple of basis points, from 138 to 140. Where this is coming from is coming from Italy and Austria. 4 basis points each for the mix composition and improvement that Andrea was highlighting before. In the case of Germany and CEE, the spread is flat. So there is not a reduction, but the spread is flat. While on the deposit pass-through, so if you look on the liability side, the deposit pass-through went down for 1 percentage point. So if you look at the asset and liability side, there is an improvement on both sides.

The next question is from Sofie Peterzens of Goldman Sachs.

Sofie from Goldman Sachs. So I was wondering if you could talk a little bit about the volume growth outlook, it was very solid across regions and especially in Italy, where we saw 2% quarter-on-quarter and 5% year-on-year growth in volumes. How should we think about the volume growth outlook from current levels? And then the second question would just be a follow-up on the Generali stake, you mentioned that you currently have closed the 9% stake in Generali, could you just remind us how the capital accounting for that stake is and how much capital it absorbed?

So let me start with Generali. We have close to 9% in terms of physical share ownership and therefore voting rights, but we have well below 2% in terms of economic interest. It doesn't absorb almost any capital because it's below the 10% threshold by a very large amount. So it is -- that stake contribute through the dividends but to get paid, I think, in the second quarter, and that is about it. And it's with mark-to-market that stake, but it is hedged on the downside and we mark-to-market, let's be very clear, well below 2%, not benign because we don't have economic exposure beyond that. So this is all it is. With the volume growth outlook across region, and then I'll pass it to Stefano.

We are quite constructive, meaning the main change or the most feasible change from a commercial standpoint as we tilted from Unlock to Unlimited was our ambition to gain market share in targeted segments and products. That means target segments means the right geographies, it means affluent, it means SMEs, it means micro businesses.

We are gaining market share in both segments. And we are gaining market share in these segments because we have a very focused effort, with all the back up from a technology, AI, people hiring. As you know very well, we're hiring thousands of people on the front end, and we're absorbing it in our cost reduction. And we continue to have traction in there. Obviously, by general volume increase reduces, we will reduce with it. So if the market does not grow at the rate that we are anticipating, we will grow less, but we think we will maintain a differential vis-a-vis others on that.

And the more the instability, given how much we have prepared for this, the people we have hired the excess capital we have, the overlays and the coverage we have allows us to be more on the aggressive side rather than pulling back if people are concerned. But obviously it depends on the general environment. We are confident on the relative, obviously, on the absolute, we are environment driven. But I'll pass it on to Stefano.

Yes. When we have commented Unlimited, we have commented that the growth of the lending would have been above the nominal trend of the GDP, especially in some areas. So for 2026, we are confirming the approach, especially for Central and Eastern Europe and for Italy as well. Now do consider that there is a slight reduction of the GDP growth. So that is also in the slide of the presentation for 2026 and 2027. So as directed by Andrea, we are committed to growth but then depending also the overall trend of GDP. In relative terms for 2026, Austria, we will grow less. So I would say that if I would rank , we have Central Eastern Europe and Italy then Germany.

And the last one is Austria for some specific also market situation and in relation to Germany. So far so good. The demand is good. We need to look the trend, especially in the second part of the year, especially in relation to the large corporate that with demand is also depending on the overall trend of the uncertainty from a geopolitical standpoint. But having said that, also April confirmed the trend that we have seen in Q1.

The next question is from Ignacio Ulargui of BNP Paribas.

I just have 2 questions, one on deposit growth and the outlook that you see for deposits across the different geographies. And if you have observed any change in customer behavior in terms of deposit costs, are the new rates are having to be clearly going up if you think customers could behave differently than in the previous rate cycle. The second question is about fee income. So you have the a very strong big driver numbers. How should we talk about that fee income sustainability going forward.

So in relation to deposits, so let's start from what happened in Q1 in relation to the deposit pass-through. I commented before that for the group moved down from 31% to around 30%. So there is an improvement. Where this is coming from? Italy is going slightly up. So move from 13% to 14%, but that's very low. We are not seeing a change in the behavior, and we are not seeing a meaningful impact from competition.

Germany went down from 46% to 45%. There, it's slightly different because we start seeing some competition in some segments from deposit pricing standpoint. Austria went down the deposit pass-through from 40% to 36%, also due to the component of term deposit that are rolling at better condition. CEE moved down from 32% to 41%. Also here, in some geographies, we see competition, okay?

So even more than Germany, I have to say we are looking in some countries where there is competition on some segments of deposits. So all in all, what you are expecting is a slight increase of the deposit cost, but also if we're looking into second part of this year and 2027, but not a meaningful one, right? So it can be something like 1% for the group. So it's not going to represent an important impact for the net interest income trajectory.

In relation to the fees and when we look to the future. So the topic is in the key segment, we're expecting absolutely to be in line with Unlimited. The topic to be looked at are fundamentally on one end, what can be connected to GDP trend, meaning adviser and financing fees were very good when we look especially to the second part of this year, if there is a slight decrease of the lending growth due to the macro, we can have some effect on the advisor and financing fees. Investment fees were also very good in Q1. April is confirming such a trend that -- or part of that is also depending on market volatility. So the trend of gross sales and sale is going well. Also the trend of internalization on fund is going well, I have to say, even better than the plan.

We need, let's say, to look the potential future volatility. But in a trend that is confirming the path that we have communicated for Unlimited. And I would not say something specific for the time being in terms of expectation for the geography. So the expectation is in line to Unlimited for all the geographies.

The next question is from Giovanni Razzoli of Deutsche Bank.

Two questions from my side. The first one is on Commerzbank, where clearly, your investment has proved very profitable with double-digit return on capital with the current cap. And in Slide #20, you are clearly defining your strategy for '28 and 2030. But I'm wondering whether if I move to in the very long term or in the long term, the core setup remains valid. If you do not have the control of the company, you cannot extract synergies, you cannot continue to impact the strategy of Commerzbank. So my question is, in a longer-term perspective, is it fair to assume that or you reach the full control of Commerzbank or you exit your investment because that would be 1 of the 2 options?

And related to this, is it fair to assume that the share buyback will start immediately after the completion of the offer on Commerzbank that is 6 months for now? That is my question on Commerzbank. The second question on Russia, which has slightly reduced the contribution on your operating profit in this quarter vis-a-vis the Q4, but the absolute amount remains pretty solid. I was wondering if you can provide us with some outlook for the next few quarters and the following years in the context of the deleveraging that you are doing in the region.

So on Commerzbank, I think that you can assume that the current setup remains valid in the long term, even if you cannot extract the synergies. Why? Because for the time being, we will be having a 100 basis points capital absorption, which may go higher if we incorporate more shares, but for the time being, let's flip that on the side and that 100 basis points of capital is yielding us more than 20%.

And the more Commerzbank does well, the more it will yield. As you see also this quarter, this is a good bedrock to complement the other earnings and gives us good support and exposure to markets we believe in over time. If they do not make their plan, then we have a put option and we are protected. So for our shareholders is an asymmetric with full upside and limited downside.

The situation on not being able to influence, I would argue that we have influenced, and we continue to influence. There was no momentum plan when we bought the first stake. There was no momentum 2.0 plan before we launched the offer. Now we have both and everybody is expecting an upgrade.

So by our very presence, we are promoting an improvement of Commerzbank, which I think we believe in and that is positive. So I would say, we are there. We intend to remain there. As I say, it's somewhere in the U.S., it would probably have taken 3 months to make an acquisition. And in Europe, it takes much, much longer. But in the meantime, if we deliver for our shareholders, fully distributed return on investment of more than 20% climbing, it is really a high-class problem. So we are determined to stay.

Share buyback. Share buyback, as we said, we pulled our request for authorization when we launched the offer because that was the right thing to do. the ECB could not approve a share buyback in the middle of the offer without knowing the outcome of the offer. If the offer, as we expect at the moment, does not reach control, we will submit, resubmit and are quite optimistic with the timing that it will take the ECB to go back to the papers and provide us with their support. So I would not say immediate, but I would say close.

Then we have Russia. So yes, I would look at it this way. Russia contributed -- and this is why we continue to highlight that we encourage everybody to look at the underlying. I know that underlying people don't like, but I think in this case, it particularly is apparent given that we are actively compressing part of our business. So Russia contributed in terms of net profit, let's keep it simple, about EUR 800 million last year, in the EUR 10.6 billion. This year, we are anticipating it will half or more than half below EUR 400 million. By '28, we believe we're going to be in the EUR 100 million area.

So when you look at our growth, consider, but we are delivering that growth, absorbing EUR 700 million of net profit in the next 3 years by compression of Russia. So the underlying growth and the strength of our core business underlying is, in my opinion, quite significant. And in terms of where we are in Russia and what is happening, very simple, it is since the invasion that we have not provided any lending onshore. It is since the invasion, but we take the minimum deposit necessary to do payments and that remains like that.

In Russia, we cannot take deposit. It's an obligation. We are down. So blending is depleting as the loans get paid back. There is a slightly longer tail on some of the mortgage portfolio, but the loans are paying back regularly. On the deposit, they are what they are. I think we are going to continue to decline because payments continue to decline as through sanction, the bonafide payment between the West and Russia gets compressed, therefore, less payment, therefore less deposits, and therefore, that compresses.

We had at the beginning of a conflict more than EUR 4 billion across border exposure to Russia. Today, we have 0. And we have recovered more than 90% of that amount over the 5 years. So I would say that if you go beyond from a P&L standpoint, we have something that is going from 800 to 100, over 3 years and that we are absorbing in full. And in terms of activity, when we are at 100, we are practically going to be focused on euro and U.S. dollar payment for corporates, west and nonsuction, Russian and the related deposit we have with that very little if nothing else. So this is the trend line.

The final question is from Andrew Coombs of Citi.

One follow-up and one fresh question. Firstly, just coming back to the point about M&A, the need to generate a return above the cost of equity. Can I just clarify that point? Is it the incremental return versus the status quo that needs to be above the cost of equity. Or is it the return on the whole position that needs to be above the cost of equity because it does make a difference because of how high you're already yielding on the existing and then the second question on the hedging cost. You've had the incremental EUR 100 million recognized this quarter, I assume there's also a slightly higher hedging costs related to the Generali stake now as well. So does the EUR 500 million guidance for the full year still hold true?

So first of all, M&A, yes, you're correct. One of the reasons why the -- there are 2 reasons that or free, but compress our return in a controlled scenario. Reason number one, we would be converting 30% but now yields well above 20%. And into 30% but will yield much less once it's fully consolidated. And therefore, we have a headwind because of that. Second, because of European regulation, and it is not fully clear to which extent the excess capital on the minimum capital for minority interest is not counted. So the lower the participation, the more of a capital spillover, but more of the spill over, the lower the yield, which is why we're very attentive to where we land in terms of control, either high or not at all.

Thirdly, that, again, depending on where we land, more than half actually 60% of the value being created is in the combination, not in the control. So those 3 variables are considered very attentively by us, and we need to assess or we will need to assess because we don't do it now, how they all interact.

So if you're looking at high participation with a high expectation of combination, et cetera, et cetera, numbers work. Well, with all of this because everything goes in one direction. When you look at low levels of control, they work much less well. And we are committed not to put our shareholders into that scenario.

One of the reason why we encouraged Commerzbank to engage and to have a joint plan, it was to reach an agreement that would back a positive outcome for all in terms of levels of controls, and that would have also allowed us to review the term of the offer. But that was not to be.

So at the moment, while the offer is directed to 100%. Our focus or our expectation is to land below control because of what we see at the moment. And as we are below control, the returns are very high, and we, as I say, in the movie, we leave to leave another day. And we will see what happens in the future. But we will remain at high returns on the participation.

For the hedging cost, the average cost for '26, '27, '28 is confirmed at around EUR 500 million, slightly lower in 2026, while higher in 2027 and 2028. So that's confirmed.

At this time, there are no more questions.

Okay. Thank you very much for your time, and we'll see you all on the road show. Thank you.

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

Good morning, and welcome to today's conference call. Please note that we will take questions exclusively from research analysts.

I will now hand the call over to Mr. Andrea Orcel, Chief Executive Officer of UniCredit.

Thank you. Good morning, and thank you for joining us. Before I begin today's presentation, I would like to make clear UniCredit's position vis-a-vis our strategy Unlimited and how we're looking at Commerzbank. Our top priority and unmatched engine for value creation for the next 5 years is UniCredit Unlimited, and we will remain fully focused on its execution.

There are 2 scenarios regarding our offer for Commerzbank. Scenario 1, remaining below control, which we can manage if we achieve a percentage that does not ensure returns above our cost of equity. In such scenario, UniCredit would probably remain below control for at least 12 months in order to fulfill its capital return commitment. Scenario 2, achieving control, with a percentage that ensures returns above our cost of equity.

In scenario 1, we revert to status quo, a net return of over 20% with full upside and protection on the downside. Such risk-adjusted return cannot be beaten by any other option. In scenario 2, we would secure a strategically and industrially valid transaction, which returns exceed our cost of equity.

Notwithstanding the significant value created by unlocked and an eventual combination, the return on investment for UniCredit shareholders is negatively impacted by the substantial incremental investment needed to bring Commerzbank to par, Commerzbank relative valuation now not supported by fundamentals and by the disproportionate capital consumption due to penalizing CRR rules in lower participation control scenarios. This constrained the premium payable. Both scenarios are a win for UniCredit. And in our opinion, Commerzbank shareholders with tenders.

The outcome depends on the level of take-up, which influences together with further transparency from Commerzbank, potential offer revision. With that premise, as Commerzbank's largest shareholder, we have an interest in seeing it fulfill its potential and deserves its current valuation. In our view, it is not currently doing so. As a result, we're making public our view to show that Commerzbank can generate substantially more value than it does today and also that its current trajectory will put at risk its survival in the medium term.

We hope that such views are incorporated into the upgraded guidance to be provided by Commerzbank on the 8th of May. As ever, in this situation, you will not be surprised that there is a disclaimer highlighted in the presentation to which I want to draw your attention. Also, our views have been developed outside in because as mentioned, Commerzbank did not engage with us in a meaningful way.

The history of Commerzbank is a story of continued operating underperformance. This has long been true. But if we just look at the period from '21 to '24 and then '25, the bank lagged both UniCredit and the sector. Growth has been weak, investment in transformation limited and the core German franchise neglected.

2025 results have been propped up by temporary tailwinds and financial engineering. They were not underpinned by an improvement in core operating performance or necessary industrial transformation in Germany. Momentum simply offers more of the same. It does nothing to change the operating fundamentals as demonstrated by Germany's KPIs continuing to lag its peers in 2028.

It runs from the hard work necessary to make the bank competitive in the long term and succeed in its core markets. Instead, it aggressively grows noncore, higher-risk international lending. It leaves Commerzbank in Germany vulnerable to an overdependency on risky bets that are not core to the business to changes in the macro environment because of the overreliance on financial tailwinds from replica with no room for error on cost of risk and to the challenges posed by U.S. entrants and fintechs in the increasingly competitive German market.

More of the same means that further restructuring is inevitable as Commerzbank is increasingly left behind by a world that is changing around it, and that is not good enough for us. Recently, the share price has outpaced the sector, propped up by a significant valuation re-rating since the very day of UniCredit's investment, not supported by improved fundamentals. So today, we propose to change the story with a different approach that was successfully rolled out at UniCredit, unlocked presupposes a true industrial transformation. It is about cutting back on risky noncore international activities to invest in the core of Germany and Poland and its international extension through trade finance.

It is about restoring discipline by balancing the right growth with investment-led efficiency. It is about creating lines of defense to protect against uncertainty and error. And it is about investing in AI, technology, infrastructure and the critical front line to create a bank that's fit for the future. It is transformation, a transformation that has been successfully delivered at HVB, yielding a turnaround that has produced Germany most profitable and efficient bank. This requires hard work, determination and commitment, a choice not to do the easy thing, but the right one.

Unlock would transform Commerzbank German operation, making them competitive and avoiding successive restructuring plan. It would also create the opportunity to combine 2 leading German banks, Commerzbank and HVB, into a strong competitive German leader, part of a leading federal pan-European group. This would generate significant incremental sustainable value upside for shareholders, clients and employees. So the choice is simple: continue on the current path of consistent underperformance or change the story with transformation, survive from plan to plan or build a bank fit for the future.

More of the same with momentum means a neglected core, continued uncertainty and a short-term focus risking long-term success. Changing the story we've unlocked would mean a transformed future-ready, stronger bank, refocus on its core and delivering much better sustainable results. The comparison between 28 numbers for unlocked and Momentum speaks by itself. Net profit, EUR 5.1 billion versus EUR 4.5 billion. Return on tangible equity, 19% versus 15%; efficiency, 40% versus 47% and the divergence will become even greater into 2030 if nothing is done.

More importantly, the numbers do not tell the whole story as unlocked would achieve these numbers while investing, addressing structural vulnerabilities, transforming and making Commerzbank capable to successfully compete and win in the future. Momentum does not.

The story is even clearer when we focus on Germany as most of the necessary progress is there. Unlocked prioritizes this Germany core franchise and related international flows, driving growth, investment and employment at home. Unlocked aims to build a stronger competitive bank anchored in Germany with a focus on its Mittelstand and families, a bank with the ability to compete and win versus U.S. entrants and fintechs, delivering value for shareholders, clients, employees and the broader economy. It would put the talent, energy and passion of the people who serve Commerzbank today at the center, giving them the tool to succeed. A new chapter, a strong competitive bank, one no longer undergoing successive restructuring plans that don't address its core issues and an investment in Germany's economic future.

Commerzbank is built around 2 valuable assets, an underperforming German business that is the mirror image of HVB and a leading Polish business that is well managed and provide a high-quality growth engine. In Germany, the comparison with HVB is pertinent. HVB is an independent self-standing German legal entity with a history similar to Commerzbank and with stand-alone revenues, costs and all KPIs that are fully visible.

When we look at the performance of the 2 banks in Germany, the comparison is like-for-like. And beyond being comparable, the 2 franchises are highly complementary. Geographically, Commerzbank is more concentrated in Central Germany, while HVB is stronger in that area. In retail, Commerzbank is more focused on the mass market, while HVB is stronger in affluent, private and wealth. In the Mittelstand, Commerzbank is more focused on small to mid in the central areas of Germany and HVB on the mid- to large in the southern and northern parts of Germany. Given the fragmentation of the German banking market and this complementarity, the combined market share of the 2 institutions is no cause of concern.

If we look back at the '21-'24 period, Commerzbank underperformed both UniCredit and the sector on all key industrial metrics, capital efficiency, operational efficiency and profitability. Germany was a drag with its gap to HVB and the sector widening. Commerzbank missed materially on cost and fees versus own Strategy 2024, while its revenue beat was due to interest rate tailwinds that propelled all banks rather than a genuine industrial step change. Not surprisingly, its 22% discounted valuation at the time to the sector reflected mismatch.

During 2025, Commerzbank continued to underperform UniCredit and the sector across all critical KPIs. The apparent beat of momentum first year was, in our view, low quality. Another significant miss on cost in the very first year of momentum, more than compensated by lower-than-guided loan loss provisions, restructuring charges and a stronger NII mostly linked to replica and noncore international lending growth. So while the net profit headline may look acceptable and still underperform the sector, the underlying '21-'24 pattern repeated in 2025. Momentum implies continued underperformance into 2028, driven by Germany. The plan does not adequately address underlying structural vulnerabilities. Across key metrics, including capital efficiency, operational efficiency and profitability, a pattern clearly emerged, a meaningful lag to the sector and UniCredit persists and possibly widens.

The business has only limited lines of defense in place to protect against near-term shocks, and we are no transformation action to make Commerzbank structurally competitive in the longer term. As such, under the current trajectory, the German franchise shall be even more vulnerable in 2028 with a significant probability of requiring yet another painful restructuring that may arrive too late.

Let me highlight a few facts. First, half of momentum-based consensus revenue growth out to '28 is attributable to financial tailwinds and rates, which may be affected by current geopolitics, AI, the digital euro and increasing competition from new entrants and customer dissatisfaction in Germany. Second, loan growth outside core markets increases by nearly 25% whilst loans in Germany remained virtually flat. This is a 25:1 difference. Third, momentum-based consensus foresees Germany's cost/income ratio landing at 51% in '28 whilst HVB shall be at 32%. Fourth, momentum builds negligible visible lines of defense, leaving the bank exposed to changes in macro and error. Fifth, momentum does not increase investment in technology and AI nor does it foresee further restructuring charges to transform the business. Commerzbank is becoming increasingly unfit for a banking environment that is changing rapidly.

Looking at valuation and share price performance, the day before UniCredit disclosed its first investment, Commerzbank traded at a 22% discount versus the sector on a 2-year forward price to earnings multiple, 22%. Such discount was due to Commerzbank underperformance across all KPIs and hence, aligned with fundamentals. Commerzbank has re-rated more than 20% versus the sector despite past and forward-looking lagging fundamentals since then. Most on the day, UniCredit investment was disclosed. I refer you to the graph on 11 September 2024.

Even the start reality, Commerzbank Unlocked represents our view of the need for a transformational long-term focused alternative but has even greater potential in case of a follow-on combination. In Unlocked Commerzbank stand-alone is aligned to a superior performance level of HVB, leveraging a blueprint that has already been successfully delivered and therefore, comes with very low execution risk.

The combination with UniCredit is via an in-market merger between HVB and Commerzbank operation in Germany and in the international network. Poland becomes just another leading entity within UniCredit Group's federal model, able to fully leverage its advantages. Commerzbank unlocked is centered around 3 connected pillars: refocus, optimize and upgrade.

Refocus means putting Germany, its Mittelstand and families and Poland truly at the center while redesigning and de-risking the international network activities not related to supporting flows to and from Germany and Poland.

Optimize means investing in people, the frontline, technology and AI adoption while targeting efficiency in noncore international network, senior overhead, operation and capital allocation while building lines of defense to protect the future.

Upgrade means enhancing client journeys and providing more and better products while transforming the way of working through simplification, technology and AI. Unlocked includes what momentum does not, investment and protection,EUR 1.7 billion of new investments and EUR 500 million of additional loan loss provision, resulting in what we believe to be EUR 800 million of additional pretax value achieved in a much more balanced, structural and sustainable way.

A clear divergence emerges between Momentum and Unlocked across 3 critical KPIs: capital efficiency, operational efficiency and profitability with important implication for long-term value creation.

On the Momentum, capital efficiency is primarily driven by external financial tailwinds and noncore international expansion, [ woringly ] at circa 25x the rate of Germany with limited linkage to Germany and Poland's direct business.

Ambition and actionable levers to sustainably grow and transform the German franchise are absent, resulting in no structural safeguards to support future performance and eventually make the bank able to compete without yet another restructuring plan.

In contrast, Unlocked would prioritize high-quality, sustainable growth, leveraging a transformation of Germany, Mittelstand and families and Poland. Noncore activities will be actively reduced to lower risk, enhance both operating and capital efficiency and free up resources to invest in the core. At the same time, the strategy would establish robust, durable foundation to protect and sustain future earnings and competitiveness.

Momentum's approach to cost management lacks precision with the overall cost base continuing to expand and cost-to-income ratio remaining significantly above peer levels. Notably, further restructuring charges for '26-'28 to support further transformation are absent.

Planned gross FTE reduction are concentrated in Germany, while international hiring persists with alleged golden parachute being granted there, limiting overall efficiency gain.

Unlocked would take a more disciplined and structural approach to productivity. Efficiency improvement would be targeted and paired with reinvestment to support growth and future competitiveness, particularly in Germany. Approximately 60% of Unlocked cost savings would come from non-HR and noncore activities in the international network, so not in Germany, remaining 40% mainly from senior overhead, bureaucracy that is rampant and across the value chain. Both would fund significant necessary investment in people, including hiring of younger talent, infrastructure, technology and AI.

From an earnings perspective, momentum remains highly reliant on favorable macroeconomic conditions and financial tailwinds, leaving performance exposed and the business insufficiently transformed to compete in the future. Unlocked by contrast, will structurally de-risk the earnings trajectory through comprehensive transformation and the establishment of strong operational and financial safeguards. This will result in more resilient, sustainable return through to 2030 and positions the bank as fully future-ready.

In summary, Momentum depends on external conditions, noncore international growth and limited incremental change. Unlocked is underpinned by refocusing on Germany, structural improvement, improved resilience and sustainable value creation. The magnitude of the performance gap only partially underscore the difference between Unlocked and Momentum as Unlocked is aimed at the delivery of a fully transformed bank, future-ready bank while Momentum does not. What is also not fully clear is that Unlocked releases EUR 4 billion of capital by 2028 while Momentum does not.

UniCredit Unlocked has already proven that it can successfully transform the bank while delivering sustainable best-in-class results, as you can see in the slide, but I will not comment further. What we have described so far is what we -- is what can be done by applying UniCredit's Unlocked blueprint to Commerzbank stand-alone. This would open a new chapter, but a true combination would completely rewrite the story.

A combination of UniCredit and Commerzbank could send a clear signal, not just to Germany, where the merger of HVB and Commerzbank would create the country leader and benchmark, but also to Europe, building a federal pan-European group and a European benchmark for others to follow. This is the kind of institution that both Germany and Europe increasingly need, a stronger, more efficient and more profitable institution, better equipped to compete and lead in Germany and Europe.

This institution would bring together 2 highly complementary geographic and client franchises and connect and fully empower Germany and Poland into a broader European network, generating significant cross-border value, an institution that would offer more and better products, upgraded channels, wider opportunities for people and greater investment firepower, an institution fit for the future, fit to compete and win against U.S. new entrant and fintechs alike.

The combination that would generate additional pretax value to unlock value creation of around EUR 1.1 billion in 2030 and beyond, supported by accelerating quality growth while transforming the efficiency frontier, funding benefits, greater scale in procurement, product and infrastructure and a deeper integration of Germany and Poland into a truly pan-European federal network. We think that these synergies would require an additional EUR 1.6 billion pretax investment by 2030. 1 plus 1 clearly equals much more than 2.

Both Commerzbank Unlocked and or a combination would blow Momentum's proposition out of the water. These numbers speak for themselves. In addition, we think that these figures represent an outstanding base floor that does not have the benefit of substantive discussion with Commerzbank and that may be revised after the revision of Commerzbank Momentum plan on May 8. Any upgrade to Commerzbank guidance driven by credible financial tailwinds should result in a parallel upward shift in both the Unlocked and combination outcomes because the proposed upside is structural, not conditional.

Management has a fiduciary duty to act in the best interest of shareholders, just as we have a duty to deal with facts. So let me address some of the latest myth that have emerged about our views on Commerzbank and the entire situation.

Assertion #1, there is no adequate premium. In reality, a meaning of premium is already embedded in Commerzbank increased valuation following UniCredit's investment. Furthermore, we made it clear that we would consider a review of our offer terms following serious detailed discussion with Commerzbank, which have not transpired.

Assertion # 2, no value creation. Unlocked would blow Momentum out of the water in terms of value creation. As importantly, value creation would be sustainable and the basis for future growth, while it will not be so in the Momentum.

Assertion 3, execution risk of an integration. Commerzbank would remain a stand-alone bank until 2028 at least, rolling out the well-tested Unlocked blueprint. Integration would follow only then. UniCredit has successfully executed more than 100 integrations, including Romania last year in under 9 months while increasing the number of active clients rather than decreasing them.

Assertion #4, risk to commerce to customers. The franchises are complementary and the large majority of clients would benefit.

Assertion #5, 15,000 job cuts. In fact, 60% of cost savings come from non-HR and noncore areas outside of Germany. Reduction in Germany would be less than half the one suggested, phased over several years, driven partly by natural attrition and offset by investment in people, technology and AI.

Assertion #6, loss of German independence. Germany would become the #1 country in the group with circa 95% of decision taken locally and its independence further protected by German laws and regulation.

Diving into detail on the final assertion, but the international network model cannot be improved and UniCredit's action would reduce support to the Mittelstand. In reality, UniCredit already commands double the trade finance business than Commerzbank. With best-in-class infrastructure, faster, more efficient, better service and lower risk, the combined platform would further enhance service and reach for Commerzbank clients. The activities that are currently being protected under the heading International Network have nothing to do with trade finance, but are related to aggressive growth of international and financial intermediary lending.

Ultimately, the facts are simple as is the choice. Risk international lending unrelated to core activity or Germany and Poland as the priority. A top-heavy inefficient institution that does not invest or a lean, empowered organization that does. Uncertainty and upheaval or transformation to build a bank fit for the future. Short-term focus with medium- to long-term vulnerability or better short-term delivery leading to sustainable growth and profitability in the future. Less value creation or substantially more value creation. More of the same with Momentum or a new chapter for better winning Commerzbank, particularly in Germany. As I said at the start, UniCredit, its shareholders and those of Commerzbank who tender will win either way.

I will now open for questions. Thank you.

[Operator Instructions] The first question is from Antonio Reale, Bank of America.

It's Antonio from Bank of America. When you launched the bid, the sale objective was to cross the 30% mark and basically break the stalemate. That granted you with a lot of optionality towards the path. And I mean, I think, the path that you have in mind is quite clear, but the time line by which you can get there can be quite different. At the start of the call, I think you've outlined some of the scenarios, and I'd like to follow up on those.

So I think you've said that there hasn't been much engagement. We've seen the public version of the Commerzbank response to your offer. And today, you provided some numbers around the value creation, which I think is something that the Commerzbank side has been asking for. So my question here is, does the scenario of just crossing the 30% still hold? And what would you define a successful outcome? I ask you that also conscious of the different capital consumptions in each of the scenarios. That's my first question.

My second question is out of the EUR 2 billion increase in pretax profit that you've talked about, more than 50% comes from the merger, and that's EUR 1.1 billion, if I understood right, and around EUR 0.8 billion would come from implementing Commerzbank Unlocked. I guess shareholders will assess the merits as to what can be achieved here by Commerzbank stand-alone or in general, with you running the combined entity, but what would you think a Commerzbank shareholders should factor in, in their decision here?

Okay. The first thing, just to be clear, we have offered to create a fully integrated working group to revise all these numbers in detail. And the headline numbers were provided during the engagement with Commerzbank. That offer has not been taken, and the views of Commerzbank have been made public. So we have always been open to provide all the numbers and all the support for reasons that I respect, Commerzbank has not wanted to do so. So let's be clear about that.

Secondly, scenarios. In my view, I know there is a lot of complexity out there, but I would simplify it in this way, 2 big scenarios. One scenario, we remain below control. And one scenario, we've reached a level of control that allows us to truly manage the bank, to move gradually towards a combination and most importantly, to ensure to our shareholders, which are often disregarded in all the conversations that I have, a return on investment that is well above our cost of equity. And I remind everybody that many shareholders are ours, probably more than Commerzbank, and I cannot break that commitment and will not.

So if we stay below control, the returns are practically similar. We will still equity consolidate. The returns will be well above 20%. They will be fully distributable. They will hit the equity investment line in revenues and equal the net income or net profit line in net profit, fully distributable. The percentage may go up slightly but not dramatically. So it's more of the same.

Obviously, as in that scenario, we would then move back to our share buyback, which we have had to withdraw the application from the ECB just because in the middle of this merger or this proposal until there is clarity, it does not make any sense to continue with that. But the moment we're finished, share buyback and the capital return strategy that we have mapped would start in earnest. But if it starts in earnest, we will eliminate about EUR 4.75 billion of capital by the share buyback of 2025 that is being done this year. That effectively would put us in a position of not pursuing any action that puts us into control for a significant period of time. I would say, given the numbers I have today, minimum 12 months, maybe even 18 months.

So in that scenario, we go back to status quo. We start again with our capital return strategy as is. We will accelerate as much as possible the share buyback of 2025, but we will stay away as we have -- we would have done all that we could to break the stalemate from achieving control of Commerzbank until such time that our capital ratio replenish to be able to do such a transaction. And at the moment, we estimate that will be 12 to 18 months, okay?

Now in that scenario -- the second scenario is instead we achieve control at a percentage that allows us, given the capital consumption that goes with achieving control, to have return on the capital consumed that exceeds our cost of equity. That is a pillar of our commitment of M&A. We will not break that, and probably everybody knows that, including Commerzbank. So in that case, we would have returned well above our cost of equity, much lower than the 20% we have now on the financial participation, but we will execute an industrial and strategic move that will strengthen the group in the future. And at the end of the day, this is why we're here. So these are the two scenarios.

One part of your question may be linked to what happened in penalizing scenarios where we do or we could achieve control. But because we are penalizing, i.e., it's controlled with a low participation, the returns are well below our cost of equity because the capital consumption is high. We will manage not to be in both scenario. And we have various levers that we can use to keep our voting participation below both scenarios and not go there. So that means that while crossing 30 will give us plenty of flexibility, we will behave in the way I have just described going forward.

With respect to -- with respect to UniCredit shareholders, that means either we go back to the status quo, potentially, we have more flexibility on Commerzbank, but we park the issue for at least 12, 18 months based on what I think today. And we go back to our full-blown capital return and we go back to a fully visible without noise Momentum -- sorry, Unlimited strategy, which we are more and more convinced about. And hopefully, at some point, it will deliver the valuation that we deserve.

If instead, we are in the other scenario, we still have the entire '26 independent. About half of '27 independent. And at the end of '27, when all authorization would reach, as you know, the process is very long in Europe. In the second quarter, then we would be getting control of Commerzbank. From that time on, Commerzbank would remain separate for about 18 months as it requires a lot of alignment, and we would not want to mess up with the merger before they are aligned. And after those 18 months, when fully aligned, we could consider a combination. But these are the time lines.

With respect to the synergies, the 40 and the 60, so the 40 is not really a synergies. It is really running Commerzbank as we think it should and as we run our own banks. The 60 are the real synergies of this transaction. And by the way, I have heard many times the fact that we need banking union, as you all know, in Germany, this is an in-market merger of 2 complementary banks that have tried to come together for 25 years, okay? One side or the other. And outside of Germany and Germany get further synergies because as demonstrated with ALFA and with our other banks in the network, our federal pan-European group achieves revenue and cost synergies above and beyond what can be achieved domestically by being part of its aggregate, and you see it in our KPIs. So 40% does not include any of that. 60% is the synergies from BNMarket merger and all of that.

I think that should answer your question, I think, but please let me know if I left anything else.

The next question is from Sofie Peterzens, Goldman Sachs.

Here is Sofie from Goldman Sachs. On Friday, there was an article in Bloomberg talking about ECB potentially imposing more onerous capital requirements for UniCredit for this Commerzbank transaction. Could you kind of discuss how your discussions with ECB have been and if there is any truth to this article? And also if you could remind us what the capital impacts are? Is it still around 200 basis points, assuming full control?

And then my second question would be around the capital release that you discussed in the presentation around EUR 4 billion. Could you just outline a little bit more around the risk-weighted asset reductions that you see across the German operations but also the international network?

Okay. Sofie, Okay. I think with respect to control, let me answer it this way. There are 2 interpretation of control within Europe, depending on which market you're in. There is a strict interpretation. Control is 50 plus 1 share because with 50 plus 1 share, you go to the AGM and you fundamentally decide and can run the business day to day.

There is another definition of control that I understand applies in Germany, which is a stake sufficient to structurally achieve control of the AGM of the AGM. And therefore, that second approach takes into consideration the number of shareholders that structurally are present and vote in the AGM. So if you have -- let me take a number. If you have 80% structural attendance to Commerzbank AGM, then it's 40 plus 1 share. If you have 90, it's 45. If you have, I don't know, 75, it's 37.5 plus 1.

So you need to look at what is the structural level of people present in the AGM. And that analysis is complicated by the fact that what happens if UniCredit increased its participation, are we getting shares from the people that are not usually participating? Or are we getting shares from the people who are participating or from both? But therefore, you don't have a clear ironclad answer today. But I would say that if you look at the past, the number is in the 40% area, slightly above or slightly below depending which assumption you make, okay?

So clearly, from an appropriate regulatory standpoint, what counts is control. Is there control or is there not control, like it counts for legal and for our accountants? But the way I would put it is that control is the ability to name the entirety of a non-workers' council related Supervisory Board of Commerzbank and then run Commerzbank day to day without any limitations, obviously, beyond the regulatory one and the minorities, et cetera. So I don't have a strict answer for you. It will be estimated, but that's where we are.

Second, you asked for capital consumption. Capital consumption obviously changes, and it's an outside in because we don't have all the numbers. But it is circa 200 basis points at 100%. It is circa around the 50% area. It is circa 280. Now that number, so to be completely transparent, does not include [ pull to par ], fair value adjustment, which you add on top. But as you know very well, Sofie, the fair value adjustment, you get back mechanically over a period of 4, 5 years, much front-loaded. So that is very manageable given the time line of the transaction. So these are the numbers.

Why is it that lower percentages lead more capital consumption? I'm sure you know, but I will remind it for people who do not know because under capital requirement regulation in Europe, the excess capital to the regulatory minimum on minority interest cannot be counted in the capital ratio of the controlling shareholders. So if you have 50%, the 50% capital you do not own is calculated at minimum regulatory requirement as opposed to the real level of capital that exists, but you are consolidating all the RWAs, and that fundamentally generates the balance. That balance automatically goes down mechanically as you move up and reduce that minority interest inefficient capital deployment. So this is what we have. I think there was something else.

Yes. The second question was in relation to the capital release following the capital efficiency action that we are aiming at putting in place, that's something similar to what we have already implemented in Unlocked. So what we are looking at after the closing is releasing around EUR 33 billion of risk-weighted assets, primarily related to action related to assets that are in the corporate center, international network and the portion of the other assets that are EVA negative.

All in all, it's slightly less than 20% of the total risk-weighted asset of the Commerzbank Group. There is also a part that can also be done via securitization. So the approach is absolutely similar to what we have already done and executed for UniCredit.

Please note that we will take questions from research analysts. So the next question is from Andrea Filtri, Mediobanca.

I hope you can hear me okay. The first question is basically, if we understood correctly then, the difference between the Unlocked UniCredit and the combination gives the synergies. So of the pretax profit, EUR 1.1 billion is with the synergies and EUR 0.8 billion is without. And the second question is, as you are engaged on this front, do you also foresee the possibility of being engaged on other fronts at the same time, given the duration of the period that this could keep you busy for?

Maybe your line is on mute. We cannot hear you.

Sorry, Andrea. So I said I was with my micro off. So the first thing is if I fully answer your second question, I would avoid all your speculations on your reports. So let me answer it that way. If we end up in scenario 2, scenario 2 is we get control at a level where we can truly run the bank, ensure a return on investment well above our cost of equity and move towards a gradual combination. If we were to be in that scenario because in the first scenario, there is nothing. We're back to status quo, so we are completely free.

But if we are in the second scenario, as you correctly point out, two things happen. Number one, because of the intersection of European and German laws, we would not have all the authorization to move in until the second quarter of 2027, okay? So we closed second quarter -- we would close the offer second quarter of '26, 1 year after we get access.

Secondly, we said very, very clearly that if we are in that scenario, we would keep Commerzbank completely distinct, separate, independent, while we would roll out an approach that is along the lines of Unlocked. And in order for us to get that done, we would need about 18 months, maybe 24. So it would make no sense for us to attempt any merger before that is done because it would just make the actual merger difficult because of a very different setup, culture and everything else of the 2 banks. And we do not want to create angst to HVB, which is working really, really well. So that would mean that the true integration or combination or merger work would start earliest, you're talking '29.

What happens between '27 second half and '29 is a team executing Unlocked as we have executed for each one of 13 banks over the last 3 years. And I think while we executed one of those for the last 3 years, we were completely free to do other things because what people forget, we're federal. Every legal entity is self-supported and independent, has its own management team. And the only time where it touches group would be at a combination level because of what would happen in technology, in AI and in a number of other areas, but not until '29. So that should answer your question.

The second one, Unlocked and combination. So the views on unlocked, as you say, they do not have any synergies because by definition, Commerzbank is kept independent. This is something that we think the bank should do anyway for all shareholders, okay? Another thing is if it's capable of doing it, but the bank should do it anyway.

The synergies, i.e., the merger synergies from combining HVB and Commerzbank, together with the group to single entity synergies that we have -- given the setup that we have as a federal group with central product factories, central technology, central procurement, et cetera, et cetera, et cetera, those come only in Phase 2, obviously, are additive to what you have in Unlocked and therefore, would only come at some point starting in '29. We believe at that point, it would be quite fast.

Now I fully recognize that what we did in Romania is smaller. But what we did in Romania, we did it in 9 months, fully integrated top to bottom, including technology, AI and everything else. And while we did it, we increased the number of primary clients by going to clients with new products that they didn't have before, exactly like what happened at Commerzbank and new solutions and the rejuvenated set of tools for the network. So that part would be in '29 or from '29 onwards, we think that we could be done top to bottom. I mean if we want to take it wide because of the complication, a couple of years, but it could be less than that. So this is the overall time line and where you get the values.

Andrea, the additional investments are also cumulative, i.e., for a total amount of EUR 3.4 billion, around EUR 1.7 billion in Phase 1, so the deployment of Unlocked blueprint. And the second amount that is around EUR 1.6 billion is connected to the combination, meaning to the merger.

If there are no more questions...

The next question is from Delphine Lee JPMorgan.

The first one is just to go back a little bit to your discussions with Commerzbank. I mean, I guess, so far, they haven't generated much. But with this presentation, I mean, what do you expect -- what should we expect? Because you've talked about these numbers potentially having upside if you had those discussions. So just trying to think about the time line here.

And then the second question is just on -- previously, you were talking about the potential for you could always revise the offer and offer higher premium, which doesn't look like it's a scenario right now even in your scenario of control. Just trying to think a little bit about sort of -- is that the case? And why would you think Commerzbank today tender more shares if the premium is not here?

Okay. So first of all, the fact that we're disclosing our views today was flagged very clearly to Commerzbank. And the reason why we're doing it is because having failed to work together and together develop a joint proposal or at least trying to develop a joint proposal, we have an offer that starts on May 5. We have an offer document. The offer document contains these numbers whereas Commerzbank knows. And therefore, we are in a position where we need to explain our views, and that's what we're doing. So there was no more time to wait, especially because the door was shut just after Easter. And therefore, we thought that the most constructive way of going forward was to come out with these views publicly to all shareholders, allowing as much time as possible for Commerzbank to react to them and potentially incorporate them or respond to them in their May 8 presentation. So this is directed to providing them with time.

Ultimately, and I want to underscore it again, the better Commerzbank does, the better we do because we have 30% fully hedged, but with full upside potential. And if they do well and earn their valuation, then our shareholders will do well, increasingly well, and it will hit our bottom line and it will hit our distribution. So this is why we are where we are.

What will happen to discussion? Honestly, I cannot speculate. To be clear, I think we did everything we could and more over the last 18-plus months to try and have a meaningful interaction with 2 sides constructively around the table building something together that they can both stand on or at least agree to disagree based on facts and numbers and not on superficial statements. But we have not been able to do so. So we had no other option than to put outside-in views, which by their very definition, make assumptions and whether the assumption may be correct or not correct. So we will be happy to correct what needs to be corrected if those assumptions are proven to be incorrect. So I don't know what will happen, to be honest.

The second point that I would like to be clear because we've had a number of discussions with many of you. If I were to look only at financial returns, there is no question that the best win is to remain where we are or just above 30% for two reasons: one, because in any case, the return of that participation yields a lot more. We have 100 basis points of capital, generating some EUR 700 million, EUR 800 million of net profit after the cost of put options, after, and going up if Commerzbank does better and if it goes down, the put option go in the money and we are protected. There is no beating that ever.

Second reason for that scenario being a win is just a conviction. We are fully convinced that we will deliver unlimited in the same way we delivered Unlocked and then more. And we are instead much more concerned as to whether Commerzbank will deliver a sustainable path in '28 and beyond. Of course, to '28, we've replicated everything, they may reach the plan if the environment doesn't change very much, but what is there afterwards.

So we think that if anything, over time, the relative valuation and the base for that valuation, i.e., the net profit line will move in our favor. And when I say medium term, I say 2 years, 3 years, not immediately, when it will be clear. In any case, we do not think it's going to get worse.

So if I take it truly opportunistically and financially, scenario 1 beats and trumps everything every time. However, we are also here to run institution and to do what is strategically and industrial right. And while less attractive financially, the scenario 2 can work because it beats the returns of buying back our own shares. And therefore, at the appropriate condition, if it beats those returns, we will go for what is strategically and industrially right.

Now premium. As I said, Commerzbank used to run at a 22% discount to the sector, 22%. Today, that is 2 years P forward, '24, '26 and now '26, '28. Now they are trading at a 0 discount to the sector. No other bank that comes from restructuring and underperformance is re-rated that fast. To give you an example, we're not re-rated that fast, and we come from 21 successive quarters of beating our own estimates, okay? So we believe that, that is solely due or mostly due, let me rephrase it, to M&A speculation.

If you look at net profit performance in '25 or trend line to '28, there is nothing there that should drive re-rating, re-rating valuation. So we believe that, that at some point will adjust, okay? And we believe that the premium is already in there. So if you take it that way, there is a large majority of that 22% re-rating, including the 5% premium we offered in our offer is due to that, not to underlying performance.

So now the premium can it be reviewed? I was very, very clear that there are 2 scenarios. One, we get below control, one and the other, we get to a level of control where we can absorb the, let's say, disproportionate capital consumption due to European CRR rules and that may be something above 50. So if you -- there are 2 scenarios. One scenario is we expect low take-up, we're happy. Financially, we win, we sit back and probably people will thank us in 2 years because we may do a transaction better.

Scenario 2, we have a high take-up and therefore, we move with a more strategic and industrial. The high take-up is driven by two things: one, a constructive engagement with Commerzbank that, a, clarifies a number of questions that we have where we may or may not have been too negative; and two -- but obviously, a joint plan is much more likely to drive take-up than no plan, no joint plan or alternative, what can drive high takeup is shareholders independently doing their numbers, reaching their conclusion and concluding it is in their best interest to tender because if they tender and we remain in the financial scenario, they still will have a better exposure to Commerzbank with a better yield.

And within 12 months, if we do any change, they will benefit from those change. And there is much more liquidity in this environment, lines of defense and a number of things that I don't have to explain you. Or they decide, no, I want to write it. Let me take the next 2 years, 3 years, I want to write it because I believe that this is the best case. Both positions are defensible. We have put them to shareholders. Shareholders will decide, and that's what it is. But for us to review the premium mildly, so don't jump ahead because if any of you does the numbers, you know with 260, 280 basis points of capital consumption to increase the premium mildly, we would need to understand that the take-up is very high. And at the moment, there is no indication that it will be. I hope I have been clear.

The next question is from Ignacio Ulargui, BNP Paribas.

I have two questions. One is coming back to the capital release, the EUR 4 billion that you were mentioning. Should we understand that, that capital is then reinvested in the bank as part of the Phase 2 kind of combination situation? Or there will be different uses for the EUR 4 billion of capital releases?

And the second one, looking to the potential implications for mBank, which you haven't looked much into the presentation, but just wanted to get a bit of a sense whether any potential takeover on mBank required by the change in control in Commerzbank is taken into account in the capital impact?

So I'll take mBank and Stefano will take the rest. So mBank is clear. Poland is a country where control ships at 50 plus 1, okay? And we are in discussion with the KNF in terms of what would happen if it would happen. As I said, we have levers to keep ourselves in a situation where we are not -- we don't drop into a situation where we have excessive capital consumption and a cascade offer in cash that are penalizing. We have looked at that. And at the moment, we are quite confident we can manage around it.

But as I said, Germany control when you have control of the AGM, Poland control when you're at 50 plus 1. You can look at what Erste did in Poland recently, and it's predicated on that. But that said, it fully depends on the local regulators and authorities, and we will be -- we are discussing with them, and we will see what the outcome is.

In relation to the first question, the capital efficiency outcome is such around EUR 33 billion, so equivalent to EUR 4 billion that we believe that notwithstanding the perspective of growth for Commerzbank perimeter in the next 4 years, let's say, 4 to 5 years, taking consideration the type of model, with increased profitability and increased level of capital generation, there is no need of utilizing a meaningful amount of such inefficiency. So such an efficiency is available for distributions.

The next question is from Noemi Peruch of Morgan Stanley.

So I have one question and a clarification. So if I understand correctly, the 2 scenarios are not really mutually exclusive if we think about the next 12 months. And in this context, I was wondering how you see the 2027 Commerzbank AGM and if you already decided the role you are going to play there. And the clarification is on the 280 bps of common equity absorption. Are you assuming you're getting to 50% in cash or in shares?

Okay. So if I understood correctly, our participation in Commerzbank AGM, we haven't taken final decisions. But for the time being, as you have seen, we've been respectful of Commerzbank we have not participated. And the view has been either we are in and we manage it or we are not. And I think that's healthy, and we like it that way. With respect -- and therefore, that's what it is. With respect to what we're envisaging at the moment, it's anything that we have -- we are buying is in shares.

The next question is from Britta Schmidt, Autonomous Research.

With regards to the likely contentious points in discussion with Commerzbank, with regards to the cost/income ratio, what gives you the confidence that a more retail-heavy German banking business can substantially approach the cost/income ratio that HVB has? I think you're suggesting 37% versus 32% at HVB.

And then with regards to the EUR 33 billion RWA savings, you point to the center and also the international business. What sort of analysis is behind that? And how would you intend to deal with the Commerzbank argument that the international business is core to their SME franchise?

And then just lastly, in general, if Commerzbank was to engage, do you already have an idea of where you could potentially see additional upside?

So I'll pass to Stefano, but I would make the general comment. The targets for efficiency are very much adjusted for the fact that Commerzbank has more retail in inverted commerce than we do. I think we are at 80-20 retail corporates, and they are 65-35 or 60-40. So if you look at the cost/income ratio target, it will still be substantially higher than HVB in '28. So it is adjusted for that as we have differentiated between the two.

The second thing that I would like to highlight is we believe that there is a disproportionate amount of non-HR-related costs that Commerzbank embeds, which is why 40% of all reduction are non-HR cost. And we have experienced that already at HVB given how German banks are usually structured vis-a-vis those of other countries. We have a very center that then drives a number of our costs related to it. So while here we have given our views, let's say, to provide you some guidance, we have granular detail behind them. And especially with respect to Germany, we are highly confident. And when I say highly confident, highly confident. But Stefano.

Yes. On the capital efficiency, as highlighted before, it's not just the international network. So the focus will be on assets that are in the corporate center, in the international network, but as done in multiple locations in UniCredit also in the ordinary activities that Compass is running in Germany.

So Per, as highlighted before by Andrea, the capital efficiency action are not going to impact the service, meaning trade finance and correspondent banking service towards the franchise and towards the clients. It specifically target to EVA negative or not sufficiently positive lending-based transaction, not with the core of the services connected to neither trade finance nor correspondent banking.

The next question is from Giovanni Razzoli, Deutsche Bank.

My question has already been answered.

The next question is from Andrew Coombs, Citi.

Just a couple of numbers ones. Firstly, on the EUR 1.3 billion of cost saves, can you just give the time frame for recognition of those saves front-loaded versus backloaded? And what the upfront cost-to-achieve charge would be in order to derive those saves?

And then second question on the revenues. If I look at the revenues that you have under your plan, it's EUR 13.6 billion. The existing Commerzbank stand-alone plan is EUR 13.4 billion. Within your plan, you're including EUR 650 million of attrition from the international network. So can you just explain the delta? Where does the incremental EUR 850 million come from? Where is the benefit? You outlined EUR 200 million from leveraging the UniCredit product functions, but just keen to understand where that's coming from.

Yes. So cost-wise, the in between Phase 1 and Phase 2. So the overall cost efficiency in relation to Phase 1 around EUR 1.3 billion of cost efficiency. Connected to that, there are overall investment of EUR 1.7 billion, while in Phase 2, meaning with the combination of the 2 legal entity, meaning the merger of the 2 legal entity, we are assuming to have cost efficiency of around EUR 800 million. In such a phase, as highlighted before, if we take in consideration the overall amount of investments, including also the IT-related one and connected one-off, the overall investment will be around EUR 1.6 billion.

In the Phase 1, the non-HR component of the efficiency is around slightly more than 40%. The HR component is slightly less than 60% with a clear focus on, let's say, international network and all the non-client-facing activity of head office, for example.

With regards to the revenue component of the equation, on the revenue component of the equation in Phase 1, we are currently assuming an impact deriving from the capital efficiency of around EUR 650 million, while we're assuming to have a positive revenue-generative initiative of around EUR 200 million, slightly less than that. A portion of that is connected to Poland. because we believe that with the franchise of UniCredit, we can generate higher revenues as happened with AF as well, for example.

Another portion is connected to Germany because we do believe that further strengthening the product offer is possible to have further revenue growth also in Phase 1 in Germany. We are also assuming to have a revenue-driven initiative in the second phase, meaning following the combination. All in all, the amount that we are assuming is similar, slightly higher than the one that we have in Phase 1.

I guess to just rephrase it for your revenue guide that you're providing the 13.6, that's using the consensus 14 as the baseline and then do the adjustments on that as opposed to using the stand-alone Commerzbank target of 13.4.

It's correct. What we are starting from is the consensus number. And then we are adding all the figures that we highlighted during this conference to the consensus number of 2028. Clearly, if there will be movement in the plan and in the consensus, we can fundamentally have a sort of parallel shift in the sense that all the actions that we have described can be implemented also if there is an improvement in the plan, in the Momentum plan or in the consensus deriving from tangible action or tailwinds, for example, financial tailwinds.

The last question is from Andrea Lisi, Equita.

I have two, one on the numbers and the other on the strategy. The first on numbers, if you can help me reconciling the EUR 2 billion of GOP of value that you can you think you can create from the integration of Commerzbank. In particular, looking at Slide 3, I'm not fully able to reconcile the numbers with this EUR 2 billion in the sense that we have the consensus base number with net profit 2028 of EUR 4.5 billion, the direction of 2030 of EUR 6 billion. There, I think that you have the Unlocked plan.

Clearly, we are comparing to 2028 to 2030. So let's assume Commerzbank stand-alone arrived at EUR 5 billion, so it's EUR 1 billion of net profit directional. Then if you combine the 2 entities, EUR 6 billion plus the EUR 15 billion you have indicated in your stand-alone plan or ambitions, we get to the EUR 21 billion. So I don't see the synergies there. In case, I don't and not able to reconcile with the EUR 2 billion you have indicated gross. Clearly, here are net, but still seems lower.

And at the same time, I want to ask you if in the numbers, you have also included the fact that currently, you are not -- you are paying on the hedging of the stake in Commerzbank and if you combine the 2 entities, clearly, there is no more need for that.

The second is on the strategy in the sense that in the past, but also in this call, it seems that in case you reach a stake close to 30%, you would remain in Commerz still with the stake. But do you think this approach could change if there is any kind of acceleration in consolidation in Italy? And yes.

Yes. In relation to the first question, your calculations are correct. So if we start from UniCredit, so for UniCredit effectively, when we're looking to 2030, the ambition is around 15. Important elements to be included are, on one hand, in the assumption of the consolidation, we will include the full numbers of [ Alati ] of Commerzbank plus the value creation of Phase 1 and Phase 2, but we need to remove the current contribution of the stakes that also Andrea mentioned before that is currently ranging between EUR 700 million and EUR 800 million, so during the period '27, '28, but can be even higher for the future.

So this difference is explaining to you why when we are summing up all the effect and when you look to the full group numbers, we will have around EUR 21 billion because we need to, let's say, on one hand, increase the positive effect deriving from Phase 1 and Phase 2, plus the growth in '29 and 2030 deriving from both UniCredit and Commerzbank. In the case of Commerzbank, it's around EUR 1 billion, as you have highlighted, but it's important that you exclude the contribution of the stakes currently embedded in UniCredit Unlimited.

So rough cut, 2030, EUR 1 billion net goes away because we lose the equity consolidation on one side, and we add a line-by-line consolidation on the other. So that's why the 2 numbers seem not to connect because in Unlocked, it's not the case. But in the combination, it is. I hope that's clear.

With respect to strategy, well, clearly, if we -- as I said before, if we are in scenario 1, scenario 1 has also the advantage that we are free and clear from anything else because we come back to status quo. Scenario 2 depends. We will see. But I would say, for the moment, we are very focused, first and foremost, on delivering Unlimited for you and secondly, on seeing where this takes us on Commerzbank. So also for us, closing a chapter one way or the other, at least for now, is quite important to be able to recover our full flexibility in every direction.

I think this was the last question. So thank you very much for reacting at such short notice and for some of you in London quite early. Thank you, and we'll see you all on our results Day on the 5th of May. Thank you very much. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

All right. Good morning, everyone, and welcome to the second day of the Morgan Stanley Financial Conference. And I want to thank Andrea Orcel, CEO of UniCredit for being here and for opening our second day. And as usual, let's start from the polling question. If we can get it -- there we go.

So what is the best M&A scenario? From here, tender offer on Commerzbank with a premium to secure ownership, reaching about 30% stake in Commerzbank and purchasing shares on the open market or reaching 30% stake, but then focusing on UniCredit Unlimited or finally focusing on M&A elsewhere.

All right. more divided than I thought. So clearly, this is very topical. But yes, we are going to keep you on your toes until the very end. And so we will start from UniCredit Unlimited, if that's okay. So my first question is going to be indeed on the plan. You set out a clear ambition to grow on your core markets and doubling down on transformation. And so can you highlight the key shifts vis-a-vis Unlocked? And can you elaborate on what you will be doing differently in the different regions?

Thank you, Noemi. I actually thought the question should have been asked do no M&A at all. It would have taken 80% of the answers, but -- so Unlimited. So if you look at UniCredit Unlocked, it was at the time a -- let's call it, bold, but conviction that UniCredit could be much better, and we wanted to move from laggard to leader and become a benchmark for the peer group, and we did that. It was particularly focused on unlocking value and it was focused on profitability and efficiency as main drivers. As we reached the end on Unlocked, Unlimited is quite different as we aim higher.

The first thing that is different is how we approach the plan, and the plan was approached saying we need to transcend the boundaries. The world is changing. We cannot consider these restrictions as a binding progress. And the second thing that we try to say is in 5 years, the world will be very different. The competitive environment will be very different, and we need to be in a position to compete and win not only with legacy banks, but also with hyperscalers, fintechs and any other competitor in the financial services space. So these are the feeling.

And obviously, financially, we move from profitability and efficiency to profitable growth and that is a big move. If you look at the 2 levers of Unlimited, we have the lever 1, Unlimited Acceleration. That lever strive to grow net revenues by 5% compounded over the next 3 to 5 years. We have a granular plan with all the items to do so. We've been prepared for 3 years to do that. The people, the training, the models, the technology, the AI, and this is what we are trying to achieve. As we achieve it, it's not an undifferentiated growth because, number one, we're very focused on profitability and risk. So margin, margin, margin, margin.

Secondly, we target the growth across client segments where we think there is an excellent opportunity for us and products where we think we have higher market share. Consumer, less mortgages, small companies credit, less large. So this is a mixed issue as well. With respect to the second lever, Unlimited transformation or transformation 2.0, it is predicated on continuing what we have done in Unlocked, where we have declined our cost 1% every year. So very progressive, very constructive, but continuous.

And we are now confident we're going to do that again for the next 3 to 5 years. How are we going to do that? Exactly as we did before, continuing to review the entire chain and machine behind the front end. Actually, the front end is growing, not reducing, significantly growing. But as we review the organization, the process, the way of working, as we put technology to work as we do nearshoring to a greater extent, we now have AI that is allowing us to, with the same work, get much greater impact in terms of what we can achieve because of the impact it has on our processes, et cetera, et cetera, and we can talk about that separately.

So when you put those 2 together, then our level of confidence is very high, particularly because like Unlocked, the plan was developed by our people first. We spent an enormous amount of time engaging. And if you were to go through our ranks, everybody knows what it is. Everybody knows what they need to do. Everybody is excited to aim for a decade of unlimited growth and beat the competition. And so that is the core of what we're trying to do, and it will result in our net income growing high single digits, our distributions to be there and maintaining the ROTE actually not at 20%, but increasing it at 25%. Now if we do that, we will be in a sweet spot where growth and distribution, if you look at the combination, it's unmatched by anybody else with the current plan, and that's where we want to land.

Thank you. And talking about a changing world. Investors have been worried about AI and the impact on the bank's profitability and asset quality. So how do you think this will help UniCredit? And do you see this as a threat or an opportunity for the sector?

So I think for us, we are convinced that AI is a big opportunity and not a threat. And I would say the following thing about AI. First of all, AI is not an end in itself. AI is a tool. If it is a tool, you need to be very clear and need to be very convinced what you want to work to use it for. And then you need to be ready to take the very difficult decisions and to execute with determination its rollout. It seems very superficial, but I can tell you it's not easy. In practice, can you completely redesign and get efficiency well above 50% on the corporate lending process, which banks use with hundreds of people on transaction monitoring or on KYC or on onboarding or on payroll or -- and I can continue. Yes, you can. However, it requires you, number one, to wanting to do it because the impacts are difficult and the engagement with all the constituency is difficult.

Secondly, you need to do the hard work of redesigning the entire process. Thirdly, you need to find a way to reallocate, retrain, upskill, et cetera, all the people that are getting loose from that, which is why our transformation 2.0 is connected to the acceleration of the top line, where we're hiring thousands of people more, not really hiring because a significant portion of that is an assumption of redeploying of people that may be in corporate lending to be in the corporate origination processes or in the corporate on the front line. So you need all these blocks to be there and you need to have all the organization excited to do it.

You can't do it top down because it's very democratic and it's not easy. But if you can do that, I think that the impact on efficiency is significant. We are quantifying it at the moment at about over 5 years effectively EUR 400 million to EUR 500 million net cost reduction net because the growth with inflation, with wages, with investment is a lot more. And we are quantifying it on the top line with this productivity gain on penetration, on segments, et cetera, et cetera. Now the negative that is perceived of AI is the client part of the negative, i.e., clients will use AI to disintermediate bank on deposit, to disintermediate bank or crush the margin on asset management, et cetera. It may well be, but it will take time. It's adoption.

And I always say that I have Copilot, I have Gemini, I have Perplexity. How much do I use it? Little. I'm a prehistoric person. It takes time for me to get to use it. My daughter at 15 just uses that. So -- but who has the money, who has the deposit, my generation. So it takes time. We have had AI impact through robo-advisory, et cetera, for a while, and it hasn't destroyed the economics. So we do think if you take 5 years' time, will it gradually or exponentially get to that? Yes. If you look at 1, 2 years' time, we don't think so, and we are not seeing any evidence of that. In 5-year time, if we have done all the things we need to do on the positive side of AI, on the efficiency, on the productivity, et cetera, we will be ready to take that on.

And if other organizations have not done all they need to do on efficiency and productivity, we will be able to disintermediate them. So we see that as an opportunity, and we have quantified the impact it's an average, and it can be more or it can be less with what we're going to do on the revenue side and the efficiency side. What I would focus, I will leave you with that more than AI, look at what will happen with the digital euro, that is more significant, depending on the structure of that and look at what will happen with tokenization and stablecoin, that is more significant on deposits. We believe we are at the front end of the game on stablecoin and tokenization.

And we think that, that may even disintermediate fintechs because the products they don't have, we do. We can tokenize something that we have. They need people and understanding to do that. So that's an opportunity. Digital euro impact on deposit, the more retail you are, the more potentially there is an impact, but the ECB is going to modulate that. So we are relatively constructive on where it's going to land. But we see that as a much greater impact on deposit than AI in the short term.

So you raised very important points as on -- point that we have heard in the past few days on this page. One of the main obstacle is the engagement of the organization to actually adopt AI and have the right incentives and having people be comfortable with their jobs and -- to actually get...

Noemi, I would say it's not only the engagement, but the discipline of the engagement. It is very easy to give Copilot to everybody. Eventually, it's a cost and what's the impact? Nil. It is much more difficult to roll out Copilot or to roll out any tool with an organization who says, I'm taking the tool to change A, B, C. And as an outcome, I can do more or I can be more efficient, I can be more productive, and I'm quantifying that outcome and therefore, give me that tool, and this is the outcome. That is a lot more difficult. But giving everybody artificial intelligence is easy, but it won't change anything. Actually, it will make your cost rise.

And at the same time, the time of actually that will take for challengers, competitors to actually disintermediate banks when it comes to deposit and eroding deposit margin and asset management margins. And you mentioned also on the tokenization and the digital euro as a tool to maybe -- that may impact retail deposits. But also there is now a tokenization on the corporate side. Can you maybe elaborate on that?

Look, I think at the moment, and things will evolve, okay? But at the moment, digital euro retail, tokenization and the rest, corporate, okay? Stablecoin, corporate. Now stablecoin, tokenization has a potential massive impact on banks, especially if they are strong in SMEs on all the business because you will be able to do, as we have just done, bonds for corporate for 30 million because they are tokenized. I can't do that if they're not tokenized. The costs are not there. So it will allow reaching a part of the market that normally nobody can reach because it's so fragmented.

So that part is a sweet spot for banks that are very strong in SMEs and have the capability to do what we're trying to do in terms of product development. We are one of those banks. So we see that positively. That's why we've done one of the first one or the first one in Italy, and we see that taking speed. Once you go into DLT and tokenization, you need to have a means of payment, that's stablecoin. At the moment, if you look at it, stablecoin in euro do not exist. It's all dollar. That's the sovereign issues. But with Qivalis, we are trying to roll out stablecoin in euro by September, and we will.

So what does a stablecoin do? By definition, the bank will take mostly because it will be somewhat watched and regulated by the ECB, mostly underlying euros, okay, with limited leverage, and we'll take it and put it in a stablecoin and it will be a means of payment. But the moment you do that, the deposit disappears. Now for corporates, that's not big deals because the market is so competitive on pricing, but it is a question on liquidity. It's not a question on pricing. And so from a return standpoint, it's positive. From a liquidity standpoint, it's negative. But we have -- we, for example, have a ratio between loans and deposit well below 100%, and we don't think that, that is an issue.

If that scales and you look at many things being tokenized, you're putting the emphasis on the client segment you serve and your product know-how and technology know-how. If you don't do bonds, if you don't do consumer finance products, if you don't do a whole bunch of products, you have nothing to tokenize. If you do not know how to do it and you're not set up, you can't tokenize them. So we think that this is an opportunity, although there will be a drag on liquidity. On the digital euro, there is different. The digital euro fundamentally is predicated on -- there will be a wallet with a limit, EUR 3,000, EUR 5,000, EUR 2,000, whatever it is. The customer will be free to move the deposit they have on the bank balance sheet onto the wallet. And the moment they do that, these are no longer liquidity or deposit of the bank. The liquidity and deposit of the ECB because it's a direct obligation. That's disintermediation for you.

That's when you look at the cost of funding, potentially the cheapest cost of funding, will move to a significant extent there. So it needs to be modulated with care by the ECB. That is an impact both on liquidity and on margins. But we do believe that the way ECB is thinking about it is constructive and it will be managed in a way that can be managed by banks. But the more banks, as I was saying, is retail. The more they have a very fragmented, low balance transactional base of deposit, the more that impacts. And the less, the less. So we are watching this with attention. We're interacting with the ECB significantly to make sure that the objective of having sovereignty and a means of payment offline and everything else that they want to achieve is achieved without the impact on banks.

And I think the ECB has a common purpose because if the banks are impacted significantly, it's not only a question of liquidity. If I have entire regions where my profitability comes from cheap deposit and you move them on the digital euro, what am I going to do? Shut it down. If I shut it down, there is disintermediation, there is the certification and there is who is going to do the KYC, the onboarding and the management of those clients because we wouldn't be there. So we do think that there is a common purpose to lend this in a constructive space. So we are -- we know there will be a negative impact. We're preparing for that, but we are relatively neutral about the impact of it.

And speaking to the topic of a changing world and adapting to it, if you -- maybe we can talk about like the start of the year and the changes in geopolitical landscape and possible changes in the macroeconomic conditions. So what is the impact that you see for UniCredit and maybe the sector more broadly?

Firstly, I don't want to be perceived as setting a trend, but we announced Unlocked and a month later, Russia invaded Ukraine and the world changed. And we announced Unlimited, and we have what we're seeing now. But I think we have been discussing now for over 5 years that we keep on looking at the past, but we have a new normal. What's the new normal? The new normal is volatility. The new normal is geopolitical uncertainty. The new normal is constantly changing environment and requirement to be more agile and adapt.

So if you look at the past, what did you have? Stability, budget, top-down control on the execution of the budget in our organization. I strongly believe and I continue -- and everybody now is more and more convinced that the new normal is direction, framing, empowerment, which means the environment change, people in down the organization needs to be empowered to adjust what they're doing, maybe do more NII, less fees, maybe adjust what they're doing to respond to the environment without waiting for the center to tell them what they do. And they can do that because they know what we're trying to do and they have a framework. It takes a long time to get to that.

And we've been working on that relentlessly for 5 years. So for us, everyone knows where we want to go. The environment shifts or changes. I'm very impressed with what the people are doing to adapt to that and still get to the outcome. Now this is fundamental because for the time being, I think every bank will tell you that the year has started well, solid. And probably any impact from what you're seeing now is probably going to be later. So I don't think there will be some impact, a substantial impact in Q1. Can there be more impact later? Possibly.

The second topic is, if you look at it that way, Unlimited is structured to exactly thrive in this kind of environment. Let me give you a few examples. Take top line. We have started by telling you we're not going to differentiate anymore between NII fees and net insurance. And why are we doing that? Because they are interrelated. So if now there is an environment of slower growth, higher rates, we are 65% NII, margin on NII increases. Volume on NII decreases. Is that negative, not necessarily because I will generate more capital like I did in 2023. On the fee side, we're very diversified on the 35%.

So investments, insurance, they get affected. Client risk management, we are off the charts at the moment. Payment off the charts. So they compensate. So that aggregate in this environment should do relatively well. And it interacts with all the levers of the plan of trying to gain share where we want to take shares because usually, people pull back in this environment, and we are ready to move forward. The second one is efficiency or cost or inflation. We have the lowest cost base relative to revenues and in absolute of any of the peers. And we've already taken $1.2 billion in '24, $1.4 billion in '25 to front-load all that we need to do to manage our cost, manage our investment.

That means, in other words, that I don't need to do a lot more in '27, '28. I may do more if I continue to front load or I can ride what I have done in the past. So there is more inflation and pressure on cost. I will manage that, and I will keep them within the 1%. Then you go on cost of risk, and we said 15 to 20 basis points. But you know how risk-averse we've been and how much we have provisioned, and we have never touched our overlays. We have EUR 1.7 billion. The cycle becomes more negative because of the deceleration. We have EUR 1.7 billion. And I would highlight that less than 5% of our lending portfolio is on energy-intensive sector or on sectors that are really, we think, affected by this crisis, that European corporates after having the shock of Russia are a lot more diversified and liquid than they were before.

And then just to talk on the topic of the day, our exposure to private credit is marginal to almost 0. So we are quite comfortable we can do that. Then you move down on the P&L. As we have been taking below the line, EUR 1.2 billion, EUR 1.4 billion of integration cost, front-loading, we can modulate that and take a lot less if we need to support our bottom line when you get to the bottom line, and that's why we're confident we can keep it. And we have excess capital and excess capital means 2 things.

One, if the market locks on securitization or if people pull back and we need to push forward, we have excess capital to deploy. If that's not necessary, we have excess capital to buffer our distribution and keep them where we want them to keep. So for us, not only in Q1, but if I look at what is reasonable to expect during -- in the scenarios in 2026 and '27, we think we're quite confident that we can deliver in the reasonable scenario. Obviously, if it goes beyond reasonable, then all bets are off. But we are going to be relatively more defensive than many people expect.

Now on Commerzbank. So can you walk us through the rationale of the exchange offer, the timing and your expectation on the future conversation with the German stakeholders?

So for us, this offer, the main purpose of this offer is to break the stalemate. The situation in which we have all been in the last 18 months or thereabout is suboptimal for everybody. It's uncertain, it's abrasive. It's everything you want to say, everybody has an opinion, is not a good situation. The only way you can, one way or the other, resolve this situation is with a constructive face-to-face engagement where all parties put on the table what are their concerns, what are the red lines and we all try to solve them.

We may solve them or not, but at least we will know what they are, and we will have attempted. To date, we haven't done that. The last 18 months, we tried, we haven't done that. This software creates an opportunity to do exactly that. And this objective is why we think whatever happens, it's a win-win. And this is the purpose and domain. If we want to the different purpose, we would have come out in a different way, but we came out this way to achieve that.

Okay. And in this context, what are the key relevant stakeholders, all the -- all the parties. What do you mean by that?

Well, look, I think, as you know, there are parties that everybody know exists. There is obviously the top levels of Commerzbank. There are the workers' council. Obviously, there is the government, who is a coalition, the shareholders. And we always forget one critical one, they are the people who are going to be quite affected by whatever happens and they are the clients, okay?

And I would say, because this is often forgotten, that applies in spades to UniCredit. We have people, we have governments, we have business, we have workers' council in Germany, et cetera. So everybody has concern, everybody has objectives. And today, for a certain reason, we have been unable to engage. And I hope that as we go forward, we will be able to engage, and we will be able to jointly try to resolve as many issues as possible.

And can you explain why you want to cross the 30% threshold specifically and now?

So again, the offer is for 100%. The offer is that is structured to be at the regulatory minimum, [indiscernible]. So we took what is required, and that's what it is. And why did we do that? Because the objective is to open a window of 12 weeks of engagement and dialogue and put all our cards on the table and try to then come out of that engagement with a common vision, a common strategy, a common plan that we can all back or at minimum, reduce the level of misunderstanding and the level of angst that everybody has by misinterpreting each other. That is the win-win. That is the objective.

I'm relatively, how do you want to say, neutral or relaxed on the outcome. But the outcome can be 3 scenarios. Scenario 1 for us, the way we view it is at the end of this offer, and now we are parking the engagement, which will be the win, our stake in Commerzbank is either slightly below 30% as it is today or above 30%, but does not reach control, okay? In that situation, what changes? Very little to nothing, i.e., we still equity consolidate, the return from the stake is the same. We still have our puts in case of downside. Our returns are the same. UniCredit Unlimited is the same, relatively limited, but we will have all the positive for having engaged and understanding where we stand.

There is one thing that will change because that is the position that we have taken at Board level. Now we are ready to engage proactively, which means going forward, even in that scenario, we will be much more public, much more proactive, always constructive on what we want, why we want it, and we will try to convince the other shareholders and stakeholders that, that is the right path. What exactly do we want? Well, it's quite easy for you, and I'm not jumping forward because the reason we don't have a vision and strategy and a plan out there is because the only way to do it constructively is to do it jointly with the other party.

Otherwise, it moves into Unilateral, and that's a completely different setup. What we want? Well, if you look at the vision of UniCredit, we want much more focus on core strengths, Germany, Poland, Less focus on noise aside, international, corporate center, much more balanced in the way we achieve results on all the levers, not to get to the outcome, a level of growth that sacrifice may, may sacrifice margin, may sacrifice risk, but actually a much more balanced and focused way of doing that and most importantly, in the core economies where we are.

And if you look at what is the outcome, very simple. If you take UniCredit unlocked and you look at UniCredit, what we have achieved by doing exactly that in terms of all the KPIs, net revenue growth, cost-income ratio, risk, cost of risk, et cetera, you can have an idea of what it is. And if you want to know what can be done in Germany, just look at HVB. HVB has done exceptionally well and now have a return on equity of 20%. They have a cost-income ratio of 38%, and we are growing no less than other banks who have not done that. We think that -- and by the way, very important because we all -- we never talk about them.

The people of HVB are excited like the people of UniCredit. They are determined to achieve that. They understand where we are going, and they want to get there. So that is scenario one. It will -- it would be after the engagement, and it will start a period of much more open dialogue and drive to try and move the trajectory of Commerzbank towards unlocking all the value that they can unlock. And I took very positively the comment yesterday that what they have on the plan are floors or minimums and they can go further. Great. But what we are saying is, yes, but how is important because it needs to be sustainable, it needs to be balanced, It needs to be risk averse to a certain extent. So this is one.

The scenario two is that we exceed 30%, and we move into control land. What changes from an industrial standpoint, nothing vis-a-vis what I just said, but the execution of those principles and on the entering plan would be down to our team, the team of HVB and our teams. And given the experience, given the motivation, given the drive that they have, we think we can execute that at pace, and we can execute that in much faster time than anyone else. The third option is we exceed control and we get close or at the level where we can eventually because it wouldn't be done immediately, execute a merger.

At that point, you add to the value created in scenario 2 or in scenario 1, the synergies from consolidating the two groups. And therefore, the value increase one more time and creates a lot of value for all. Now in that last case, you would have a bank that is a leader in Germany, leader in the Mittelstand, where we intend to grow much more than is being done at the moment, not only through lending, but through the provision of a number of services that are not being provided at the moment, like hedges on rates, commodities and FX.

Look at what's happening after the situation now. This is a part that is really flying for us, payments and trade finance and a number of other things where we can push further and support the economy more. It would be helping German transformation and all of that will be in certain in a federal pan-European group that would be, roughly speaking, 1/3 Germany, 1/3 Italy and 1/3 Austrian CEE. We would have redefined what UniCredit is as east of Center East, we would be the leader, and that would have a lot of value for what we can achieve in terms of exchanges inside.

So this is -- these are the scenarios. At the moment, our expectation because we are based on not knowing anything else, as that we're going to land somewhere in one and that we had no regrets because it's a win-win just if we can trigger an engagement of dialogue, understand where everybody stands and break this stalemate that has been plaguing us for now 18 months.

So you have a clear view of what the combined entity could be, and you're very constructive on Germany, Mittelstand and Poland. And the most frequent question that I've heard in these days is about the offer itself. So how should we think about the option of an offer with a premium to actually get as close as possible to full ownership?

At this point, this is not a scenario that we are considering. However, at this point, any change would be based on the outcome of dialogue and engagement. So let's hypothetically say we have a dialogue, it's productive. We can all back an outcome that all stakeholders feel comfortable with, number one.

Number two, a number of the concerns that we have in terms of areas where we would need to prepare for plugging in gaps or whatever it is, are not justified or we are reassured or whatever, on that basis, could we review the terms of the offer, which then would become something completely different because we would move from break the stalemate and create engagement to, we had engagement and we have an outcome that is positive and that supports a common vision, a common strategy, a common plan and a way forward that everybody is behind, then in that scenario, depending on what that is, can we review the term? Of course, we can.

At the moment, we can only say that based on what we have now, the expectation is scenario one, can we evolve towards some other scenario? Yes, we can. Most of the -- how we evolve to that scenario and what does it mean in terms of offer terms, et cetera, is very much determined by the outcome of this engagement. One, it need to occur. Two, we need to see if we're all trying to resolve compromising and getting to a lending that makes sense. And then depending on that lending, we can in "price that impact" on our assumption and review what we need to review.

Thank you. So I have a few more questions, but I would like to open for Q&A if there is any questions from the room.

Very clear. Just one point of clarification, please, on what you set out for Commerzbank. Any change in the terms of the offer would only be if there is a recommended deal by both sides. Is that what I should hear from what you said?

So I would say that at this point in time, if there is a landing with a recommended deal, which would mean, by and large, all stakeholders agree, and I always remind people that we take very seriously and we respect the stakeholders of Commerzbank, we also expect people to take very seriously the stakeholders of UniCredit because it takes 2 to be happy to have a good marriage, okay? But if we were to do that, that's for sure. Can it evolve in something else? At the moment, we're not considering to evolve in something else, but after this engagement, depending how it goes, depending what are the views of all the stakeholders, if we do not have a common ground, but the overriding view is that we should go in another direction, then let's talk about that other direction.

But in this process at the moment, we think either we're trying to break the stalemate and we understand that we don't make any progress, okay, then we will regroup and think or there is progress and a common ground, and that could be a foundation to do something much more. Can we do something if we don't get there? I don't exclude any option, but I'm saying that just because I don't exclude any option. It depends what it is. Is there a 90% or an 80% support towards a certain outcome, then we will reassess whether we need to go with the 80% as opposed to 100%. But for the time being, it's very premature to discuss anything like that.

Is there another question from the room? All right. So I'll go on and I would like to ask you if you could remind us the expected capital impact of the offer and also the impact on capital return, especially on share buybacks in general return 30% of your payout.

Okay. So the first thing is offer or no offer scenario, no scenario. I think we have demonstrated in the last 5 years what we think about capital returns. We want them sustainable. We think they're critical to our equity story and the equity story of any bank in the sector. And that is also why our plans, our visions, our strategy always takes in mind what is the ultimate impact, not only on amounts, but on capital generation in order to be compelling on the capital return side. Any transaction will not affect that principle. Actually, we would apply them to what we purchased.

Now second thing is if we land into scenario 1, i.e., between where we are today and no control, nothing much changes from that standpoint. We have equity consolidation. If we get some more share, we will have greater contribution. The consumption of capital is marginal to nil because we are paying in shares. We will continue with the current strategy. And I don't think that there is much change. If we get to control and gradually up, obviously, there is a significant impact on capital. And as it's always the case, you get significant impact at the beginning, you take the shot.

And then after you've done all your restructuring charges and everything else, you start pumping out a significant additional amount of capital and that you can return to shareholders. And we always look at that relation with a few principles that we do. Number one, the dividends are sacrosanct. So this is the cash you actually get. The rest is stock that is moving, but you could potentially sell it in the market. But at the end of the day, dividends and dividend per share. And we try to defend those all the time.

Secondly, in this case, obviously, the share buyback of '25 will be affected. Potentially more, it depends which scenario I don't have all the scenario. But we will address that at the time. And we will explain how that will affect -- it's in a way, I'm using part -- I'm using those share buyback to buy shares in something else and I bring my earnings in through there as opposed to buying my own. That's why it's very important that our metrics of exceeding hopefully significantly the return of our share buyback in any acquisition that we make works because even if I don't do a share buyback, I bring in additional earnings at a better return after I do all the synergies. So in that case, we are affected. For the time being, we intend to continue on our path, i.e., we're seeking approval by the AGM of the dividend and the share buyback of 2025. That continues.

Secondly, the process of authorization of our share buyback of 2025 is with ECB and is ongoing. That does not change. But we have been very clear that in order to decide what we do with the share buyback or the outcome of the share buyback, we need to wait for the completion of the offer and to see where we are. And I think the regulator will do exactly the same thing, if I may, but that's my speculation. So this is what you should expect.

And completion of the offer, is it like the settlement, so 2027? Or is there...

No. I think as you have all realized, the processes for certain offers in Europe are still, let's say, not very speedy. I think we will know the outcome in June '26 or a little bit later if by any chance, the timing of the offer is longer. That point, you will have clarity. The settlement is later because in German offers, you get a number of the approval, antitrust, et cetera, et cetera, et cetera, at the back end, and they therefore build at the back end.

And therefore, the settlement is in 2027. But already in 2026, we will know what is the outcome. And if the outcome is no control, we can proceed. If the outcome is controlled, we will know that by '27, something will happen, and we will react accordingly to be in a capital position that is defensible.

One more time, I will open to Q&A, there's anyone in the room?

I'm Rene Petersen from Nordic Asset Management. You didn't mention anything about your current or your interest in consolidation in Italy during your presentation this morning. As an outsider to Italian businesses, it's quite difficult to gather what the heck is going on. Can you comment about the surface, so to speak?

So you have no -- so shall we use the same word and say that the consolidation process in Italy at this point in time is in a stalemate, maybe somebody breaks it, but it's in a stalemate. If you look at the 3 potential groups that people speculate could be aggregated among themselves or with us or whatever, they all have "influencing or controlling" shareholder or group of shareholders that do make any offer unfeasible unless you first have an agreement with them. I'll let you speculate what the view of those shareholders in every one of the 3 situation is.

But at the moment, it is fair to say that we have not seen, especially vis-a-vis us, any opening for negotiating anything, okay? We also think that the -- it will be difficult to negotiate because when you have, let's say, de facto controlling shareholders in those groups, they all want something and lending to a situation where everybody is happy is a lot more difficult than what we're talking about here today. So at the moment, that is the situation. I do believe that Italy requires much more consolidation, maybe a little bit less than Germany requires more consolidation, but Italy does.

I do believe that eventually something will happen. But it will be led -- shareholder led, I think, because you need to overcome that hurdle. Can that change? Possibly. Maybe if we all read the newspapers, there is one situation that seems to be a little bit more fluid than others. But then again, once the shareholder meeting is done, there will be new CEO, new management, new this and new that. Again, speculating, it's not exactly a moment where the next day they want to do something with someone else. There is a lag.

The last thing that I would say for us, we are very proud of our Italian routes. But to a certain extent, these are routes that we have much expanded, okay? Our model of bank, our vision, where we want to go is pan-European. That does not mean I'm not very proud to be Italian and what we do in Italy. And it does not also mean that we couldn't be more consolidated in Italy if we tried, okay? But it does mean that I look at the pan-European first and foremost. And if you look at the pan-European first and foremost, then a potential combination or an agreement with Commerzbank propels the group firmly into that and changes the nature of the group once central, there wouldn't be any more debate about that.

And so if I had a choice, as I thought I had a choice in September of 2024, I would lead with what changes the group and structure it firmly in a certain direction, what we're talking about now. And it is not that it's not important, but at that point, it would be within a pan-European group of a certain nature, not the opposite. I don't know the timing. Every time everybody says this will not happen in life, you can be certain that it will happen soon. So I'm not making any prediction. Many people are talking, many people are speculating.

But look, if there is an outcome, I would say this, our process in Commerzbank should be over one way or the other in June. And so we will watch with attention, and we will see what there is. But as I said, because you need to have an agreement among shareholders, whoever gets that agreement and its firm it's very difficult to break it because they would have come together towards that agreement.

Fantastic. Thank you very much. And thank you, Andrea Orcel for being here.

Thank you very much.

Good morning, and welcome to today's conference call. Please note that we will take questions exclusively from research analysts. I will now hand the call over to Mr. Andrea Orcel, Chief Executive Officer of UniCredit.

Thank you. Good morning to everyone. Today, UniCredit has announced its intention to launch a voluntary public exchange offer for all the ordinary shares of Commerzbank. We currently have a direct voting stake of around 26% and an additional stake of around 4% held via total return swaps. This offer is designed to remove a 30% cliff edge that exists on the German takeover law and generate a period of constructive engagement with Commerzbank and its stakeholder over the approximate 12-week offer period.

Our expected outcome is to exceed the 30% threshold without reaching control remaining at the equity accounting method with negligible capital impact. The offer exchange ratio will be determined by BaFin in the coming days based on the 3 months VWAPs of both Commerzbank and UniCredit. We expect this to be 0.485 shares of UniCredit per share of Commerzbank, implying a EUR 30.8 price per Commerzbank share or 4% premium as of closing on March 13, 2025. This action has become necessary to protect our position due to fluctuation in the size of UniCredit stakes caused by the continuous share buybacks by Commerzbank.

Taking these steps gives certainty and transparency to the size of the stake that UniCredit holds at any one time. It also allows UniCredit to take advantage of the upside from any share buyback in the future and freely acquire shares in the open market. Our message to Commerzbank today is it is now time to talk. So we hope this offer underscore this message and our continued willingness for dialogue with Commerzbank management. We remain convinced of the significant value that the constructed value would create. We expect the start of the acceptance period to be in early May following the approval of the offer document by BaFin. This will run for 4 weeks with the end of the acceptance period in June. An extraordinary general meeting will be called for early May to seek authorization for the related capital increase.

Moving to our distributions. We're still seeking shareholders' approval for the 2025 share buyback in the amount of EUR 4.75 billion at the AGM on March 31. The ECB approval for this share buyback is still pending. We will, however, commence the share buyback only after the offer period closes and dependent on the final offer take-up. There is no impact on our dividend policy. The offer has no downside vis-a-vis the aim to trigger constructive engagement and the existing stake continues to be hugely value accretive.

Maybe some last comments before I open to questions. Our goal with this action is to overcome the 30% cliff edge. We can only achieve this with a voluntary tender offer, which as prescribed by German law is an offer to all shareholders for 100%. Our expectation, though, is not to go significantly above 30% given the offer price. We're not seeking control, but we are seeking constructive dialogue with Commerzbank and wider stakeholders. Thank you all, and I now open for questions.

[Operator Instructions] The first question comes from Antonio Reale of Bank of America.

It's Antonio from Bank of America. No, just trying to understand a little bit more what you were saying on the call and just contextualize this in the grand scheme of things. So why the move now, why you want to go above 30%? It's clear you want to sort of have a dialogue and force a conversation on this, but just sort of to better understand the sort of context, that would be super helpful.

Okay. So I guess why now? I think it's -- as I said, it's a number of reasons. The first reason is we are just 30% as approved by ECB and transparently communicated to everybody. We continue to have risk in managing our position because every time there is a share buyback, we need to sell down our stake to remain below 30%. And incidentally, we need to assume if and when the shares will be canceled. And making a mistake on that creates a risk for us. It also from an interest of our shareholder standpoint, prevents us from further consolidating or benefiting from the share buyback as we are forced to sell shares every time. So we be, if we're successful, we will be over 30%, we won't need to sell down anymore. That's the first point.

The second point, which is connected to that, as per German takeover code, we -- in order to pass the 30% threshold, we need to launch an offer of 100%. We are launching that offer. But when we offer the 30% on the German law, we are free to buy in the open market an unlimited amount of shares up to 100% if we were to so wish, which at this point in time is not the intention post offer. But it is a possibility.

Therefore, for our shareholders, it gives us full flexibility of staying where we are, moving slightly and managing the stake in their best interest. Why now? Because at this point in time, we still feel that UniCredit Unlimited will significant more value on a relative basis than that of the, let's say, the peer group in general other banks, we feel it is a good time to at least manage the situation proactively as opposed to continue to be in the current situation of action and continuous uncertainty of what could be next.

And yes, vis-a-vis Italian code, I would just say that this is -- this is a personal interpretation is Italian code when you pass 30%, the question is at which level you reach control in order to be successful in their thresholds. In the German code, there are no thresholds. There is just an offer with an offer of 100% with the intention to pass 30%, but there are no threshold. So there is more flexibility than there is on the Italian code. And as I said, I'm not an Italian layer, but that is what I understand.

The next question is from Hugo Cruz of KBW.

I was just -- so a couple of questions. One on the capital impact. You said you expect negligible. Is that because you expect very little take-up? Or if you could give us a little bit sensitivity if the capital impact -- if you have more shares standard, what would be the capital impact? That would be very helpful.

And second, on the timing. So you're launching this offer, and I understand from your press release, settlement would only be in the first half of '27, so almost a year from now. But so can you launch another offer in the future? Or are you stopped from doing anything more formal for a while? So again, if you could clarify the timing.

Thank you. So let me start with the last one. We can launch our offers. So fundamentally, when the offer is finished, we also would be free to launch our offer if we so wished. We don't anticipate at the moment to do anything like that. But yes, we are free. The second part was -- the first part was? Capital. Yes. Okay. So we anticipated that capital is marginal because of the expectation that we will now reach control. If we were to -- and therefore, that we will continue to equity consolidate our stakes. If we were to reach control, let me give you an order of magnitude, if we were to be at 100%, the impact on capital will be circa 200 basis points.

[Operator Instructions] The next question is from Britta Schmidt of Autonomous Research.

On the payout policy, you mentioned on the share buyback, if I understand it correctly, that the size could potentially be impacted depending on the outcome of this. Maybe you can explain a little bit what you meant with that.

And on the capital impact, do you intend to hedge the stake? Or given that you're issuing shares for that, there's no need for that from a capital perspective? And then lastly, what do you expect from Commerzbank in terms of engaging in discussions? When you say time to talk with now, do you have any certain kind of time line in mind?

Thank you, Britta. So let me start with -- so first of all, if we do not reach control, we will be equity consolidated. We will have paid for the stake in shares. There will be marginal capital impact. At this point in time, we have no interest or plan to hedge the stake. But there is no limitation in doing that if we were to think that, that's a good idea for us to do. I bring -- I take to your attention the fact that if we do not reach control, the stake could be anywhere between marginal to several percentage points. So the open position would be management -- manageable and we would equity consolidate. So this is the first point.

On the share buyback, you're right to raise that. So let me take a specific example. Let's suppose we were for any reason that we don't anticipate now to be at 100%. If we were at 100% at that point, there would be 200 basis points of capital impact, as you say. And you have your own trajectory, it would be significantly below our target CET1. And we would round up the -- we would review the amount of share buyback in order to remain within the range. So in that case, yes. But as long as we are in no control and equity consolidation, no.

As if we go into control and line-by-line consolidation, which obviously would be a completely different scenario and a scenario where the -- you then start talking about synergies and everything else, then because of a 200 basis points impact, it would affect the share buyback. But I would also like to bring to your attention that in that case, which is not our expectation at the moment, the combined bank would then be shooting a substantial amount of capital thereafter, catching up very quickly on what we may have had to reduce or eliminate at the outset, okay, because the shock is in first year, but then it moves up very, very quickly into capital generation.

With respect to engagement, look, I think we have been for reasons that are defensible in every side, we have been in a long period of let's say, positive engagement as an institutional shareholders behind closed doors, comments back and forth, et cetera, et cetera. But we have not been able to engage more substantively on areas where we really do think, given our experience that substantial more value can be created, what else could be on the table, not on the table, but more substantively, more proactively. And the answer has always been that we needed to make a proposal.

Now we cannot make a proposal proactively without, a, making an offer, and b, which we just did; and b, without engaging constructive with the other side because if we make a proposal without engaging constructive with the other side, we immediately trade into aggression, hostility, et cetera. So what we're saying today is now there is an offer. The offer opens circa, it may move a little bit, 12 weeks of time where everybody knows there is an offer. And in the light of day, transparently, we can have engagement and see where that engagement brings us, hopefully, to resolve the situation that I think is [indiscernible] for everyone.

But in this way, if we both agree on a path forward that is more productive, the net-net outcome would be that of a, let's say, constructive and positive reaction on both sides and next steps that we believe can add a lot of value for both institutions with or without control.

The next question comes from Giovanni Razzoli of Deutsche Bank.

A couple of questions. I'm sorry because the line was a little bit bad when you answered some. So your point is that once the offer is completed in the first half of 2027, you will be free to buy whatever shares of Commerzbank on the market without any time constraint, right? So this is the first clarification.

And the second clarification, you clearly stated that you don't aim to get the control of Commerzbank. You don't plan to consolidate on a line-by-line basis, Commerzbank. So you stick to your equity method consolidation. But in the assumption that you were, in any case, exceed 50% stake as a result of the offer. We don't know what the market is going on. We don't know any about Commerzbank shareholders' reaction on that. What shall we expect in terms of dividend distribution and dividend policy going forward?

Okay. So yes, point number one, as per German law, once the offer is completed, so earlier than '27, once the offer is completed, we would be free to buy in the open market an unlimited number of shares, okay? We would be like any shareholders, we can buy whatever we would like. We would have made an offer. The offer would have allowed us to do that, okay? Only in the open market. If we were to -- so that's point number one.

Point number two, and as I said, at the moment, this is not one thing that we are planning, but everything depends on where we are when the offer completes. The second point is, as I said, while the offer is 100%, that is German law, and I cannot get out of that. The expectation given the terms of the offer, which is actually a positive expectation given that the -- one of the key objectives with this offer is to trigger a positive engagement with Commerzbank is that we will not reach control.

If we don't reach control, then it's equity consolidation like today, but you're adding to that equity consideration, the stake bought at this point in time for shares, so no capital impact. And it's more of the same. Hopefully, it's more of the same with a dialogue with Commerzbank that is a lot closer and a lot more constructive than we have today, if I may, a dialogue like we have with Alpha Bank in Greece.

If we move to control, then as I said, taking a number at 100% is 200 basis points of capital impact. There would be, as I said, an initial impact on the share buyback, not on the dividends, which we always consider [indiscernible] and the very, very last line to touch and we don't intend to touch. Post the initial adjustment and understanding, what is the situation in terms of organic capital generation? So within that framework, that you know has ruled all the time how we address our dividend -- our distribution policy, we would be consistent with that approach, and we would go back to distribution that are consistent with that approach.

I can't tell you exactly if that distribution will be 80% of ordinary or different, higher or lower, but it will depend strictly on the amount of capital we would generate in the years to come. The current expectation would be that in such a scenario, which at the moment, we consider remote, the amount of organic capital generation that would come out of the combination would be very substantial and therefore, would benefit positively our distribution going forward, not negatively.

But until such a scenario were to materialize, it is premature for me to tell you. So I can only tell you the principles that have guided the way we distribute capital and we return capital to investors will remain the same. What that will entail would be dependent on where we are if indeed we are in that scenario.

The next question is from Delphine Lee of JPMorgan.

Just a couple of ones, quick ones. First of all, just to understand on the CET1 impact. So you say it's negligible, but you're raising equity. So I guess that positive impact from raising equity is offset by a bit of goodwill. Just wondering also just on your CET1 deduction from the higher stake, are you -- do you have to sort of like mark-to-market the stake at the new offer level? Or just trying to understand a little bit the different moving parts within capital?

And then second quick technical question is just if, let's say, the stock tomorrow is below the offer price, I mean, you can already -- although the offer only starts in May, can you already buy shares in the market because you're anyways at the moment below 30%? Or do you have to actually wait now that there's an offer out there? And then the last question is just more -- just generally speaking, kind of like on Commerzbank and your interest in Commerzbank.

I mean, you want to have more engagement and more discussions with stakeholders, but what is really your time frame? Is it until '27? I mean just to understand a little bit the time line of where you want to be? Or are you committed to holding a higher stake in Commerzbank for the very long term?

Delphine, in relation to the accounting and capital treatment, so the accounting treatment, if there is no control, will not change [indiscernible] as Andrea, meaning we will keep on applying the equity consolidation. When you apply the equity consolidation, what counts is not the mark-to-market, let's say, the market value of the stake, but it is the equity of the company. So we will keep on applying this instead of using the current percentage, if there is something more, we will equity consolidate something more.

On the prudential perspective, on the regulatory capital perspective, is that there is no control. We will keep on doing what we do. As you have highlighted, we will issue more shares -- so from this perspective, the regulatory thresholds will be slightly better because we will have slightly more capital, but we're not expecting to have a meaningful impact, neither positive nor negative. Also from EPS standpoint, we're not expecting to have a meaningful impact.

So with respect to the time line, I think for us, we believe that there is significant value that can -- or further value that can be created by Commerzbank. We obviously believe in Germany. We believe in the Mittelstand -- we love Poland, and we have clear benchmarks and a clear view of what a bank like Commerzbank can achieve given our own experience in Germany and in the CEE. So we think that a constructive engagement at minimum that further aligns these points of view, maybe not completely, but further aligns them is beneficial to unlocking most of the value, if not all the value that we think is in there.

If that occurs and that occurs within a dialogue that is more constructive and closer, as I said, potentially as Commerzbank as ALFA demonstrate, there will be a lot of value for us and for Commerzbank and for us to be created, and we can observe how that maps out, still creating a lot of value for shareholders. It is not for me at this point in time to discuss, but you know that hypothetically and in general, I do believe very strongly that Europe requires bigger, stronger banks. I do believe very strongly that Germany's financial services and in particularly banking market is excessively fragmented, and this is not in the best interest of clients and of the economy anywhere, not only in Germany, but in Germany, in particular.

And I do believe that a combination would not only add a lot of value to shareholders, but a lot of value to Germany, to Europe, to clients and to people that work at Commerzbank and UniCredit. And I think there is a path through that. At this point in time, I have said it, so you know my opinion. To date, it has not been -- that opinion has not been shared by everybody. I hope that through a constructive engagement, we can find a path to further align our opinion and eventually land to a place that is in the best interest of everybody.

Now I can't give you a date. What I can tell you, and I think you know that, Delphine, if and when I will see that the current approach no longer adds value for our shareholders and UniCredit, we will act. And one of the reasons why I acted today, or rather the Board, decided to act today is because we felt that continue to stall was a suboptimal situation for both us, Commerzbank, Germany and everyone and that this offer was a neat way to open dialogue and to try to put back both center court and try to engage with each other and find a good outcome. You can imagine the outcome I eventually hope for, but it doesn't need to be that. It can be other outcome, but our progress on the current situation. So I would leave it at that.

Sorry. And then on the question around sort of like buying in the market ahead of May, that's, I guess, still possible.

It's possible operating on the market, but still in the limitation that we have, meaning we cannot go over 30% of the voting rights because we need the authorization to do that, and we will need time in order to get an SSA authorization. So this is a very important element to be considered.

The next question is from Anke Reingen of RBC.

Sorry, I just have some questions on the technicalities. When you say control, just to confirm, that will basically translate or correspond to a 50% stake? And then you say the offer price is be defined in the next couple of days. I just wonder what's the sort of like fixed element? Is it the exchange ratio of 0.485? And then lastly, on the ability to buy shares in the market from H1 2027. Does that apply to the government stake as well? And why does it take so long? So that's the second one.

Control means, for sure, when there is a legal control, i.e., when we have a 50% plus 1 share. It will be also assessed if there are situation where we might have de facto control if the percentage is below 50%, but it's premature to assess if there is a situation like that. So for the time being, it's fair to assume 50% plus 1. The exchange ratio is depending on the average price in the last 3 months of the stock in line with the regulation in relation to what we can buy following the finalization of the offer in 2027, there is a possibility to buy in the market. So the topic is that's a very important element we need to buy in the market.

The next question is a follow-up from Britta Schmidt of Autonomous Research.

It's a very hypothetical one. But if there were constructive -- if there was constructive engagement with Commerzbank and stakeholders, would it be a possibility for you to change this offer and create a larger offer for the whole of the company?

Thank you, Britta. So 2 things. First of all, to be clear, the offer is for 100%. So the offer is for everything. Our expectation is that it will not reach there, but the offer is for 100%, okay? The second thing is -- at this point in time, we don't know. But if you ask me whether it's possible, it is possible. You know our views and our metrics on valuation of anything that we do.

And I bring to your attention that the current, let's say, uneasiness in the market due to a number of factors, geopolitical and other have brought back our share buyback return to about 13% at 0 execution risk. And obviously, we have full confidence on Unlimited, full confidence. And therefore, whatever we were to do that is, in your words, more than what we are aiming to do now or what we're expecting to do now would need to exceed that return materially to offset risks.

So it's not as simple as saying if it's constructive, we go. It is -- we would like to be constructive. We would like to find a path. We also recognize that this is our opinion, that relative valuation are a little bit better than they were. But at the moment, we strongly believe that the valuation does not reflect full potential and that the valuation of Commerzbank has an element of speculation in it, which is normal given the situation. And therefore, anything that we were to do needs to deal with -- would need to deal with that.

But I repeat, at the moment, if we were to land below control and have a strong dialogue and a strong cooperation and further alignment as an intermediary step or other step, I would be delighted. But -- so it will depend where things go in the next 12 weeks. And like everything, it doesn't depend on us only. It depends on both sides and the stakeholders of both sides, which includes a variety of people and centers of interest, okay?

The next question is from Andrew Coombs of Citi.

It's Andrew from Citi. If I could just ask a couple of questions on the technicalities. One is just if you were to go above 30%, but not to take full control, what would be the implication for voting rights? Would you only get voting rights up to 30%? Or would you receive voting rights on the additional shares as well?

Second question is just on timing, assuming you don't achieve full control, is there then a 12-month restriction before you'd be able to launch another bid? And then finally, you talk about buying shares potentially in the open market. What are the limits on the amount that you can buy in the open market?

So with respect to shares we can buy in the open market once the offer completes, no limit. Differently from other jurisdiction, hypothetically and theoretically, we could buy whatever we don't own up to 100%, without limitation, without other offers. Secondly, we -- as we said, we can launch another offer if we want to, we're not obliged to. We're not intending to at this time. And we can do so after this current offer is closed, which means June, not the settlement in 2027. Obviously, if there were other offers and the condition were different, they would extend to this offer.

So there is a clear rule in Germany, 12 months. So anything that we do above and beyond after these 12 months, except buying shares in the open market, if the condition were to be better, that would extend to the shareholders that had been tendering today. Thirdly, with respect to the stake, once we complete the offer and if as a result of completing the offer, we are over 30%, we would be entitled to vote in full the entire stake that we hold at that point.

If by voting that stake, we reach control, then you move in the scenario of offer where we reach control. But let's take your number that is simple. Let's suppose we are 34%. We don't have control. We can vote 34% if we want to do -- if we want to vote 34%. We're not limited to 30%.

The next question is from Jeremy Sigee of BNP Paribas Exane.

Just on the topic of further engagement and dialogue that you're keen to have. Have you had engagement with German policymakers and politicians in advance of the move you're making today? And do you have a sense of what they want in order to be supportive of a combination?

Look, we have had some conversation, not as much as we all would have wished. And I do think that this software provides us with a transparent platform to broaden and to go much deeper in those conversations. I think we have a good idea of some of the matters. Obviously, maybe not all of them, but some of them at least. And we are absolutely open to find solution in order to have everybody on board.

The next question is from Ignacio Cerezo of UBS.

I've got 2 questions. The first one is a clarification on Delphine's question before. If you need to revalue the current stake with the new price, the total one or the deduction basically you have on that doesn't change? And the second one is on the 200 basis points capital impact under a full takeover scenario. If you just incorporating the consolidation RWAs any goodwill, also issues like fair value adjustment, restructuring costs, et cetera? And if not incorporated, if the number will be very different actually to the 200 basis points.

So there is no change in the accounting treatment, we don't need to revalue the shares. If there is a change in the accounting treatment, meaning if we go for a full consolidation in that moment, yes, there is a revaluation of the previous stake, but only in such a situation. So based on the expectation with no full control, there is no revaluation of the current stake. The impact on capital of around 200 basis points are taking consideration different items, including also 100% of risk-weighted assets, goodwill and deduction. So these type of items are fully included in the calculation of the around 200 basis.

The final question, sir, is a follow-up from Hugo Cruz of KBW.

So the issue with full control, I understand the accounting on legal terms. But the problem is that the government -- German government has 2 board seats and then there's the workers' council. So if you were to revise the offer after engagement, is it fair to assume that you'd be under the assumption that the government will sell the stake to you? Would that be a sort of a requirement for a future -- a potential future offer?

Hypothetical cases. So I would say the following. We are not approaching the matter today in the way we're approaching the matter today to be aggressive or style to the German government or to Commerzbank or to anybody else, which means we hope to find a lending but everybody can join forces around and that -- which outcome is in particular interest of all of us, in my opinion, first and foremost, of Europe, given where we are today. Having said that, we do not need -- if you're talking control, okay, we do not need the government stake or everybody to tender the shares to achieve that control.

I was taking 100%, Hugo, as round number. If we go to 100%, this is the impact on capital, but we can get control lower than 100% at 70%, at 60%, at whatever it is. And in which case, if the government were to elect to stay, the government likes to stay. With respect to the voting, I think, as I said, there's not an extra condition, but the approach we're taking is one where we want to create consensus. And we want to very openly create consensus and trigger this dialogue.

And therefore, this is not a -- I'm going to run in and we are going to have the outcome that we're going to have, but it is one where we're going to spend a lot of time in engaging, understanding and trying to find a lending that is, let's say, compromise but is acceptable to everybody.

At this time, I will hand it back over to Mr. Orcel for any closing remarks.

So thank you very much for everybody -- to everybody to jump on the call this quickly. I'm sure we will have some more engagement and questions. And I guess I'll see you all or most of you at Morgan Stanley later this week. Thank you very much, everybody, and thank you for attending. Bye-bye.

Good morning, ladies and gentlemen. Before I hand over to Ms. Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded. Ma'am, you may begin.

Good morning, and welcome to UniCredit's Fourth Quarter and Full Year 2025 Results Conference Call. Andrea Orcel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano Porro, our CFO. Please limit yourself to 2 questions. Andrea, please go ahead.

Good morning, and thank you for joining us. I'm proud to present our record fourth quarter results, crowning our best year ever and concluding 5 years of UniCredit Unlocked. UniCredit Unlocked was a transformation beyond what anyone thought possible. It released UniCredit's potential, taking us from laggard to leader among legacy banks and set a new benchmark for banking. It allowed us to lead the way in all metrics, including profitable growth and distribution. It exceeded all the KPIs we set for ourselves and built an incredible momentum that sets us apart today. Some teams might see this achievement as a reason to pause and reflect, but not this team.

This team is taking this momentum and using it to dramatically increase our aspirations, expand our vision and supercharge the next phase of our profitable growth. While others are now following the path we carved with UniCredit Unlocked, we are determined to leap ahead. Today, we transition from UniCredit Unlocked to UniCredit Unlimited. If UniCredit unlocked traded up our bank's potential, UniCredit Unlimited is about transcending the boundaries of legacy banks to continue to lead in the new competitive environment that includes fintechs and hyperscalers. Our people remain the linchpin across the 2 phases. They are dynamic, driven by excellence and continuously upskilled. We are able to adapt to the changing needs of our clients and the environment, delivering faster decision, better service and more creative solutions.

We are an institution with a flexibility to navigate the unprecedented speed of technological change and the unpredictability of geopolitics. This is the start of a bold new era for our bank, one defined by unlimited possibility, bold ambition and fundamental rethinking of what a pan-European bank should be. We're doubling down on accelerating profitable growth, and we are doubling down on our transformation, challenging every assumed limit of what UniCredit can be. This is necessary, and it is urgent. Fintechs and hyperscalers are not slowing down and technological development is only speeding up. It challenges us and redefines the boundaries we used to take for granted. But the work we have done in UniCredit Unlocked positioned us uniquely to go beyond these boundaries.

We have the credibility, the ambition, the motivation and the determination. We have the momentum and the strengths. We have a clear vision and a clear strategy. We have the proven ability to flex and adapt to manage change. The time has come to rewrite the rules of the game. This means fundamentally reimagining what a bank must look like. It means overhauling our inherited assumptions, outdated models and artificial boundaries. It means not being bound by convention, but challenging them wherever they are found. It means recognizing that the greatest risks are not change and volatility, but remaining still and yielding to artificial limitation.

UniCredit Unlimited is our commitment to move beyond those constraints to think, to act and build without limits. UniCredit Unlimited will provide a new blueprint that blends the strength of the traditional banks, the agility of a fintech and the dynamism of a technology company to create a personalized offer that truly puts the client of today and the clients of tomorrow at the center of all that we do. It will enable us to continue to both grow profitably faster and generate capital more than any other bank in the market. This phase reflects our unlimited ambition for our clients, unlimited opportunities for our people, unlimited potential to deliver profitable growth and distribution for our shareholders and the commitment to provide limitless opportunities for future generation of Europeans.

Just as we set the transformation trajectory in the past with UniCredit Unlocked, now we are both accelerating our quality top line growth and doubling down on transformation, leveraging modern technology and AI to push the boundaries of what is possible. With UniCredit Unlimited, we aim to exceed all expectations of what a bank can be and forge a new path for a new era of European banking. Our ambition has always been clear; to become the benchmark for banking and unlock our bank and our people's potential to deliver for all our stakeholders.

From '21 to '25, we did exactly that. We maximized efficiency, both operational and capital, while reigniting quality top line growth, delivering unmatched return on tangible equity and sector-leading distribution growth. We laid strong foundation for the future, leveraging a supportive risk and cost of risk environment. We have moved decisively to become the benchmark of the sector, delivering top-tier net revenue growth, the best operational efficiency, market-leading organic capital generation and superior return on tangible equity. This outperformance is not theoretical. It is a testament to our ability to execute, to deliver what we promise and to do so consistently quarter after quarter, year after year.

From 2026 to 2030, we will change gears, striving to transcend the boundaries of service, productivity and efficiency that still constrain legacy banks. We will further accelerate our quality top line growth, capturing profitable market share across the right geographies, the right client segments, the right products. We're building on the last 5 years to deliver a decade of unmatched performance and returns. The pillars to reach this success remain unchanged: Quality top line growth, operational and capital efficiency, profitable bottom line growth outside organic capital generation underpinning growing distribution.

Our outcome remains unmatched per share growth at high return on tangible equity and outsized sustainable distribution for the benefit of all our stakeholders. We aim to accelerate our quality top line growth, growing net revenue at 5% annually to around EUR 27.5 billion by '28 and directionally aspire to exceed EUR 29 billion by 2030. We will double down on transformation, leveraging technology and AI to reset the efficiency frontier. This will take our cost base down 1% annually to around EUR 9.2 billion by 2028 and below EUR 9 billion by 2030. This leads to best-in-class profitable growth as we aim to grow net profit at a 7% compounded annual growth rate to around EUR 13 billion by '28, increasing our return on tangible equity above 23% and directionally, aspiring to reach EUR 15 billion by 2030 with a return on tangible equity of 25%.

For shareholders, this translates into unparalleled per share growth and a continuation of our market-leading distribution story with 80% ordinary payout. And before complementing with excess capital deployment or return, we aim to deliver circa EUR 30 billion in the next 3 years and EUR 50 billion in the next 5. This is in addition to the EUR 9.5 billion related to full year 2025. We're in an enviable position of not having to compromise between being able to grow at the top of our sector and remunerating shareholders attractively also at the top of our sector. And we have excess capital available to accelerate our growth and distribution further should we choose to pursue M&A or returning it to shareholders if no better opportunity for deployment is found.

These financial strengths and the structural advantage of our presence in 13 plus 1 market provides us with a unique advantage for inorganic growth. Any M&A will be approached with the same discipline applied to date. Three core elements underpin our superior equity story that intends to deliver a decade of outperformance with an unmatched combination of profitable growth and distribution. First, our winning proposition. We have proven our ability to relentlessly execute, transforming from laggard to leader. We benefit from structural advantages that are hard to replicate and even harder to match.

Second, strong momentum. Full year '25 was a year of record performance achieved while absorbing more than EUR 1 billion of headwinds from rates and EUR 1.4 billion of front-loaded extraordinary charges to strengthen our future trajectory. Third, our winning strategy. UniCredit Unlimited is a plan designed to reset what best-in-class looks like. We will accelerate quality growth and redefine sector efficiency, pushing beyond traditional legacy boundaries. We have a proven and scalable transformation blueprint. This is enhanced by structural advantages, combining attractive geographic footprint, best-in-class product offering and a high-quality client franchise. This blueprint is rooted in group scale with local reach. We started by putting clients truly at the center, unifying the organization around one common vision, strategy and culture. We empowered our banks and our people. We shrunk the center to what truly adds value and benefits from scale, ensuring our banks are as independent as possible within one clear group strategy and framework.

This has created a bottom-up execution-driven culture that is delivering exceptional results. We harness scale only where it generally creates advantage, product factories, technology and data and AI, procurement, unlocking synergies and raising effectiveness across the group. This federal model enhances the entire system. The group provides platforms, capabilities and direction while empowering local bank delivery for clients and drive superior performance. UniCredit Unlocked was built around one core belief that there was an unmatched potential inherent within our bank that needed to be unlocked by leveraging our structural advantages.

First, our attractive geographic mix. We are the only truly pan-European bank with 13 banks plus 1 embedded across Europe with top 3 position in 90% of our markets. This gives us scale, diversification, stability, limited FX dispersion in our results, lower geopolitical concentration compared with other cross-border models, and it provides strategic optionality, including M&A opportunities across 13 plus 1 markets. Second, our high-quality client mix. We have more than 20 million primary long-standing client relationships skewed towards private, affluent and SMEs, where returns are structurally more attractive, driven by a higher RoAC, cross-selling and crossover ratio. Third, our targeted product mix. Our group product factories, combined with our granular local reach, provide a breadth and depth of offering that local competitors cannot match.

All of this is brought together and leveraged by our people, continuously striving for excellence, raising standards every day and turning strategy into delivery. Our structural advantages reinforce each of our 3 financial levers, delivering an unmatched combination of profitable growth and distribution. First, operational excellence. Our pan-European footprint is geographically closed and increasingly integrated. We increasingly operate on shared platform, common infrastructure and converging processes with common products, delivering unmatched efficiency.

Second, capital excellence. We combine high-margin lending with capital-light products distribution enabled by our unique product factories seamlessly connected to our distribution and a client mix skewed towards more profitable segments. This allows disciplined capital deployment at high RoAC, driving both profitable growth and capital generation. Through increasing internalization, we are retaining more value across the chain, including investment, insurance and payments.

Third, quality profitable growth. We're exposed to structurally higher growth in Central and Eastern Europe with limited FX dispersion and to a fiscal stimulus dynamics in Germany. Italy remains our core capital-light growth engine, while Austria ensures resilience and further growth potential. Our federal network means we lead in cross-border solution, amplifying growth through cross-selling and upselling across market and products. This is why our outperformance is structural and gives us confidence in our superior growth and distribution over time. We have delivered top-tier net revenue growth and established ourselves as a leader in efficiency, organic capital generation and return on tangible equity.

We have outperformed peers in value creation, driven by strong share price performance and distribution growth, resulting in best-in-class shareholders' returns. The past 5 years demonstrate our consistent execution and outperformance, positioning us to extend this leadership into the next 5, achieving a decade of outperformance. We have delivered a record fourth quarter and record full year, running 20 consecutive quarters of quality profitable growth. This strong momentum is broad-based across all KPIs, delivering today while building for tomorrow. We are the benchmark, and we are entering 2026 with unmatched momentum. NII, fees and net insurance, cost, organic capital generation, net profit and ROTE, all performed better than expected at the beginning of the year. The underlying engines remain strong. NII sequential growth for the first time since rates began to normalize.

Fees and net insurance growing ahead of expectation, supported by investment products and the internalization of life insurance. Cost flat, entirely absorbing new perimeter, minus 1.8% without them. This allowed us to front-load more than EUR 1.4 billion of extraordinary charges in hedging and integration costs so that future profitability is cleaner and stronger. As a result, net profit reached EUR 10.6 billion in '25, up 14% with return on tangible equity increasing 1.5 percentage points to 19.2% or importantly, 22% when adjusted for excess capital compared to peers. Distribution increased 6% to EUR 9.5 billion, crowning our best year ever. On a per share basis, we accelerated further with EPS up 20%, DPS up 31% and tangible book value per share up 19%.

Our revenue engine remains strong. NII proved more resilient than anticipated, fully absorbing over EUR 1 billion of rate compression. Margins remained stable, supported by quality loan growth of 4% and disciplined pass-through of 31%. We saw the first sequential NII increase since 2024, up 2% quarter-on-quarter, a clear sign that the trough is behind us. Fees and net insurance continued to grow, up 6%, driven by accelerating investment fees, supported by strong commercial momentum, internalization of life insurance in Italy boosting net insurance income. Fees and net insurance also saw a sequential pickup in the quarter, up 1%, with the ratio to net revenue reaching a top-tier 36%, up 2 percentage points.

Investments, including hedging costs, were down 14% as they were impacted by preemptive hedging costs in the quarter. Investment would have been up 60% without that. The contribution from equity investment is set to materially increase in 2026 as the impact from the equity consolidation of Commerzbank and Alpha fully materializes and hedging costs decrease.

Trading and balances, excluding hedging costs, declined due to a positive one-off impact on balances in '24. They would have been up 2% excluding this. Overall, our top line remains well diversified and increasingly balanced with NII stabilizing and growing fees compounding and investment poised to strengthen significantly.

Our net revenue remains resilient, supported by a disciplined approach and a cost of risk that remains structurally low. Cost of risk stands at 15 basis points, continuing to benefit from strong write-backs and confirming the benign credit environment across our geographies. We have kept overlays unchanged at EUR 1.7 billion, the highest in the industry, preserving a significant buffer to mitigate future pressure on cost of risk or to further support profitability. Asset quality remains sound, net NPE ratio at 1.6%, low default rate at 1.3%, coverage broadly stable at 44%. This consistent quality across portfolio demonstrates prudent origination, robust underwriting, discipline and tight monitoring.

Together, these drivers sustain our net revenue through the cycle. Our operating performance was better than expected with GOP down only 2%, 1% excluding one-off hedging costs. Costs remained flat, whilst at the same time, fully outsourcing the integration of Vodeno, Aion, Alpha Bank Romania, the internalization of life insurance and the continued significant investment in technology and people. Excluding new perimeter, costs would have been down 1.8% this year. Our cost/income ratio remains the best in the peer group, supported by resilient revenues and strict cost control and confirms our ability to deliver efficiency while continuing to invest. Even with rate headwinds and significant investment, we preserved sector-leading operating efficiency, reinforcing our competitive advantage.

As a result, our core operating performance is materially better than our expectation with GOP resilient, revenue stabilizing and the bank entering 2026 with a much stronger underlying run rate. This is efficiency with purpose, streamlining where it matters, investing where it counts and ensuring that UniCredit continues to deliver sustainable high-quality growth. We delivered record profitability, taking advantage of one-off gains, life insurance stake revaluation, Commerzbank badwill recognition, favorable taxes and higher-than-expected Russia contribution, together with strong momentum to front-load more than EUR 1.5 billion of integration and one-off hedging costs to strengthen our future trajectory.

Net profit reached EUR 10.6 billion, up 14%. Return on tangible equity exceeded 19% -- with return on tangible equity of 13%, reaching 22%, up 1 percentage point and best-in-class. Capital excellence continues. Organic capital generation was strong yet again, broadly in line with net profit and complemented by other one-off levers. This allowed us to support EUR 9.5 billion in dividends and share buybacks and the equity consolidation of Commerzbank that will significantly contribute to our future growth while keeping our capital position essentially stable. The decline of our CET1 from 15.9% to 14.7% was due to expected significant regulatory headwinds and additional taxes in Italy.

On a pro forma basis, for the equity consolidation of 29.8% of Alpha Bank and the Danish compromise, our CET1 ratio shall increase to 14.8%, although with a timing mismatch. As such, net of regulatory headwind and Italian taxes, our CET1 ratio would have remained stable at over 15.9%, while supporting EUR 9.5 billion in distribution and circa EUR 3.5 billion from equity consolidation of Commerzbank and Alpha. Italy confirms its leadership, outperforming peers across all KPIs and acting as the group capital-light growth engine. In '25, our franchise gained strong momentum with loans and deposits growing 2.7% and 3.8%, respectively, expanding our market share in the targeted segment.

This commercial strength supported a resilient top line performance despite the challenging rates environment, which hit Italy above and beyond any of our markets. Revenues were down only 3.1%. NII declined 7.8%, but excluding the impact of rates, grew 4%, giving us confidence in what we can achieve going forward. Indeed, NII shows a clear acceleration in the quarter, and we expect its sequential growth to consolidate further in the first half of 2026. Cost of risk remained stable at 27 basis points. Fees and net insurance continued to grow, up 6.5%, supported by strong commercial momentum with total financial assets, excluding deposits, up 12%. We continue to improve our efficiency while investing with cost down 2%. All this translating to a RoAC of circa 27%, the best in the country.

Germany confirms its leadership in efficiency and profitability in the country, remaining the group resilient anchor. The franchise is also showing the first signs of acceleration with loans up 1%, gaining market share in the targeted client segment. Revenues increased 2.1% despite the challenging rates environment. NII was up 0.6%, visibly accelerating in the quarter, up 1.3%, giving us confidence in what we can achieve going forward. Cost of risk remained stable at 20 basis points. Fees and net insurance grew 4.4%, supported by strong commercial momentum with total financial assets, excluding deposit, up 7%.

Germany continues to deliver operational efficiency while investing with costs down 4%. All this translates into a RoAC of 21.3%, the best in the country despite substantial regulatory headwinds.

Austria confirmed its leadership in efficiency and profitability relative to its peers in the country, remaining another group resilient anchor. The franchise is showing signs of acceleration with both loans and deposits growing 3%, increasing market share profitably. Revenues declined 3% due to the challenging rates environment. NII was down 8%, the trend clearly reversing in the fourth quarter, but was up 5.7% sequentially. Cost of risk remains low at 5 basis points. Fees and net insurance were up 1.8%, 6.3%, excluding the disposal of Card Complete, supported by strong commercial momentum with total financial assets, excluding deposit, up 6%. Austria continues to deliver operational efficiency with costs flat while investing.

All this translates into flat net profit at a RoAC of 22.6%, the best in the region, fully absorbing NII headwinds and a higher bank levy in the country. CEE confirmed its leadership in profitability and efficiency in the region, remaining the group's growth engine. The franchise shows strong acceleration with loans up 11% and deposits 7%, delivering on our ambition to grow profitable market share. Revenue rose 5.5%. NII was up 2.5%, showing strong sequential growth. Cost of risk remains low at 11 basis points. Fees and net insurance grew materially by 10.7%, supported by strong commercial momentum with total financial assets, excluding deposit, up 20%. Central and Eastern Europe continues to deliver operational efficiency with a cost/income ratio at 34.6%, absorbing most of the impact of new perimeters.

All this translates into a RoAC of 27.4%. Client Solution is our product factories that converts group scale into capital-light, repeatable growth. They represent more than 90% of group fees and net insurance. It is central to how we strengthen client connection while improving the quality of our revenue mix. Client Solutions delivered EUR 11.7 billion of net revenue, up 5% and EUR 8.2 billion of fees and net insurance, up 8%.

Within that, Investment continued to perform strongly with net revenue up 9% to EUR 2.5 billion, supported by the continued expansion of our offering and the strength of distribution, including strong growth in one market.

Insurance, now a meaningful growth pillar, was up 15% to EUR 1.1 billion. The internalization of life insurance further strengthened our value retention and positioning. Advisory & Financing Solutions net revenue grew 17% to EUR 2.1 billion, reflecting our ability to leverage the franchise across markets and client segment. Client risk management delivered EUR 2.3 billion net revenue, up 9% with very strong RoAC, reinforcing the quality of client-driven activity. We're closing 2025 with record results and entering the new year with strong momentum and a stronger underlying run rate than expected. We beat start of the year expectation on all core operating lines. We were able to take EUR 1.4 billion in extraordinary charges, which together with our overlays of EUR 1.7 billion that remain intact and our excess capital greater than EUR 4.5 billion, further protect and strengthen our future trajectory.

From first quarter of this year, we will implement an intra revenue restatement. Total gross and net revenues are unchanged. This has no material impact on the underlying growth trends of NII and fees plus net insurance. What changes is the presentation of our result aimed at improving comparability versus peers, transparency and predictability. Specifically, we will move commodities interest margin from trading to NII, certain certificate costs from NII to trading, securitization cost from fees and NII to balances and bank insurance negative indemnities from balances to fees. The managerial reclassification of hedging cost from trading to investment remains unchanged. We believe this will make for a more clear and homogeneous aggregation of the drivers of our P&L.

UniCredit Unlimited is predicated on going beyond traditional boundaries. It is about disrupting, about innovating and rethinking how we grow and operate. UniCredit Unlimited is built on 2 pillars. First, unlimited acceleration. We intend to gain quality market share and grow revenues profitably faster than our peers through quality NII and fees and net insurance. This is further supported by the capital-light growth of the net income of our equity investment. Second, unlimited transformation. In parallel, we are determined to reset our efficiency frontier, not from a standing start, but by leveraging our leading position, the experience we have gained in the last 5 years getting there and the new AI and technology tools that are now available.

During the next 3 years, we aim to grow our top line at 5% CAGR with net NII plus fees and net insurance, excluding Russia, at above 5%. Importantly, the earnings of our equity investment, net of hedging cost should more than offset the impact of our Russia compression and substantially exceed it on a net profit basis. To deliver our ambition on net NII plus fees and net insurance, we intend to grow market share in a targeted and profitable way as we have done in the past. Quality first, capital-light and with higher value per client. We aim to go deeper with the clients we already have and win new primary relationships that matters, focused on private, affluent, SMEs and the large corporates we are closer to. We aim to maintain our NII RoAC at around 20% through disciplined targeted profitable lending, not volume for the sake of volume.

We aim to increase the weight of fees and net insurance on net revenue towards circa 38% over time, improving the quality, resiliency, profitability and capital generation of our earnings. Our equity investment growth over time is capital-light. Our unlimited acceleration stands on 4 mutually reinforcing pillars. First, our people. They remain the engine of our success, delivering impact through a shared vision and winning culture, combined with relentless execution. Second, our factories. We continue to strengthen the connectivity between our product factories and our distribution that closely interprets our clients' needs while expanding our offering, internalizing more of the value chain and scaling innovative solutions across geographies.

Third, our channels. We leverage a superior omnichannel model; physical, remote and digital; with AI elevating speed, accuracy and personalization. And fourth, our digital and data. We are accelerating AI adoption across client service and advisory, technology and operation, using it to deepen relationships, improve efficiency, increase speed and unlock new value. This is how we turn scale and innovation into sustained competitive advantage. We continue to invest in our people, engaging them in the definition of our strategy and objective, providing them with personal growth opportunities, fostering a culture of ownership, empowering them, developing them through a corporate university now focusing on deepening skills in digital and in AI and continuing to hire to drive growth. Our people have been essential to our success so far, and they are essential to achieve our ambition.

Our product factories combine into a powerful engine of capital-light, scalable growth. We continue to enhance their strengths and deepen their connection to the front line, ensuring that every capability we build translate directly into fulfilling client needs and hence, direct commercial impact. We're expanding our product offering so we can meet evolving client needs across Europe with greater breadth and precision. We aim to grow our share of wallet in the right segment and geographies while improving cross-selling for international clients, leveraging our Pan-European footprint. We will continue to internalize more of the value chain across key products, this allows us to retain more value, control quality end-to-end and deliver an offering that few competitors can match.

And we're embedding digital solution across the entire platform, DealSync, Smart Factor, Trade Finance gate, for example. We're turning innovation into a tangible uplift in client experience, revenue and efficiency. Let's take the first example, investment. This model is already delivering. In Asset Management, we are transforming the role that a distributor can play by gradually capturing more of the value chain, internalizing the blocks in which we can add the greatest value. As such, we have created a new benchmark for what is possible in asset management, and we are not done. Our distinctive asset management platform holding a leading market share across 13 plus 1 countries now ranging from proprietary asset management to value-adding selection and repackaging of third-party mutual funds to proprietary capital protected certificate and to unit-linked in which we command a leadership in Italy with a 30% market share.

Our One market funds have grown from 0 to more than EUR 30 billion in 3 years, and we aim to more than double that amount by 2028 and triple it by 2030. At the same time, our internal value retention has increased from around 60% to above 80%, and we target beyond 85% by '28 on an increasing base. This transformation improves clients' experience and returns as it gives us full control and materially strengthen the economics of our business. And we are applying the same successful formula across other factories, including insurance, client risk management and even payment using internalization, innovation and scale to create even more value. Our omnichannel setup is one of our strong competitive advantage. We combine physical branches, remote AI and people-supported advisory with digital platform into a single seamless client experience.

AI is enhancing every touch point, improving speed, accuracy and personalization. Clients choose where, when and how they interact with us, and we adapt. Our network excludes 3,000-plus branches focused on high-value personalized interaction. UniCredit Direct, providing flexible and tailored remote advisory. Digital and hybrid channels, key access point for every interaction of our client. This is an omnichannel model built for today's expectation while we developed tomorrow's opportunity.

A case in point, Buddy. Buddy is a tangible example that is transforming our client access, advisory and banking services and its innovative model is setting a new blueprint. It is more than a digital channel. It is a fully fledged remote branch that offers clients a full product and service catalog digitally with 24/7 access to AI or people-based support. It is seamlessly integrated with the rest of the branch network and channels and offered a tailored experience at a lower cost to serve. It has already reached 800,000 clients by the end of last year with a trajectory towards 2 million by 2028, and we expect it to continue to grow at an accelerated pace after that. The Buddy model is ready to be exported across all our 13 countries and beyond. Please do come and try it. We have several other pilots at different stages of development being experimented across the group, in Poland, in Croatia, in Bulgaria, for example, but if successful, will be rolled out more broadly.

We aim to be at the forefront of what can be achieved using technology, data and AI in our sector. Their rollout is underpinning the improvement in client experience and productivity that supports our targeted gains in market share and ultimately, the quality growth of our core revenue. We follow a clear ROI-driven approach, combining group-wide critical process by process redesign with a bottom-up use case development to maximize impact. We have unified our data and AI platform, enabling control and ability to scale custom solutions. Our AI platform already ensures approximately 35% lower time to delivery and 30% lower IT cost. We have multiple AI-driven solution already in place such as UniAsk and DealSync already driving tangible results, and we are just beginning. We're in the process of leveraging AI to reshape client engagement through AI-powered service channels, next-generation virtual assistants, predictive analytics for tailored solution and smart recommendation for adviser.

At the same time, we aim to further empower our people by giving them upgraded tools to enhance the quality of their work and their productivity while streamlining and automating manual processes. DealSync is a case in point example. DealSync is a tangible example of how technology and AI transform the service we can provide to clients, in this case, mostly SMEs. It is an AI-powered platform focused on matching and introducing SMEs among themselves and with investors and adviser that would otherwise not happen given their fragmentation. DealSync reduces marginal cost, expands access to capital markets and creates new business opportunities for clients and for UniCredit. Already live across all UniCredit major market, it has been recognized as an Abby innovation winner in 2025 and has already captured a market of over 4,000 SME deals opportunities since its launch 1.5 years ago.

We see digital asset as a structural shift, and we're moving decisively across asset tokenization and digital money, pioneering in many areas. On tokenization, we have completed 2 proof-of-concept initiatives in mini bonds and structured notes, showing how tokenization can simplify issuance, cut cost and accelerate execution for clients. On digital money, we are a founding member of Qivalis, the European strategic systemic alternative to U.S. dollar-denominated stablecoins. We are also actively looking at our unchanged settlement instruments as demonstrated by our participation in the ECB-led PONTES initiative. All of this positions us as an early leader in real-world asset tokenization and reflect tangible progress in a space where there is often far more hype than real execution.

Our ambition is clear; to become Europe's reference point for tokenization executed with a focused strategy and a defined road map. In the crypto space, our approach is more careful and neutral. We are offering interested clients access to public ETPs with underlying crypto with clear disclosure to inform on volatility and risks. We have also pioneered capital protected certificate with underlying cryptocurrencies, an innovative product that mitigates the downside risk of the asset class.

The second pillar of UniCredit Unlimited is unlimited transformation. We are aiming to reset the sector efficiency frontier once again. Starting from a position of strength, best-in-class capital and operational efficiency with unlimited, we shift gears again. We move from improvement within existing boundaries to transcending those boundaries, reinventing ourselves and using new technologies and AI to support that step.

On capital efficiency, we aim to further increase our net revenue to RWA to 8.6% and move beyond that by 2030. On operational efficiency, we aim to decrease the cost base by 1% per year to around EUR 9.2 billion in '28, confident we will maintain that trajectory towards 2030 and beyond. We will do so while supporting growth and investing, staying at the forefront in the future as we have done in each of the last 5 years. We continue to sharpen our capital efficiency as we remain focused on growing NII while maintaining a 20% RoAC and increase the weight of capital-light revenues, including the growth of the contribution from our equity investment in CommerzBank and Alpha net of hedges.

We will continue to execute securitization above the cost of equity, enhancing capital velocity and reinforcing the quality of our lending book. In practice, this means deploying capital only when return justified, redirecting it to the right geographies, the right clients and the right products and maintaining our leadership in profitability, growth and distribution. Over the past 5 years, we simplified and streamlined our bank, proving that even a large multi-country institution in Europe can become sharper, faster and more efficient. That was a critical part of UniCredit Unlocked. It was about fixing what was inherited and building a model capable of outperforming peers.

The next phase is fundamentally different. UniCredit Unlimited is not about incremental improvement. It is about rethinking the operating model at its core and the key enablers of these shifts are technology and AI. They allow us to go far beyond what manual processes or traditional structure can achieve. We are automating at scale, embedding AI into every critical workflow; accelerating execution across risk, compliance, finance, operation and HR; removing friction and eliminating repetitive tasks. With these tools, we can redirect capacity towards high-value activities, faster, critical decision-making, key value-added steps in technology and operations, deeper client engagement, delivering stronger commercial impact.

Value activities are how we reset the industry operation frontier. This isn't simply about efficiency, but about thriving in a competitive environment that is rapidly shifting, having the courage to lead the change of how the work itself is done. Vodeno is our next-generation proprietary core banking platform, a cloud-native modular infrastructure that accelerates implementation, improves flexibility and reduce dependency on third-party systems. It provides enhanced internal technical expertise powered by more than 200 specialists across engineering, technology and data and AI, a sandbox to test entry in new markets and segments, validating new features and products, a foundation to scale embedded finance and Banking as a Service. It enables us to deliver a faster and lower cost to implement and cost to serve. And once validated, solution can be expanded across group at speed.

Over the last 5 years, with UniCredit Unlocked, we have organically transformed this bank, driving the best total shareholder returns in the industry. With UniCredit Unlimited, we face an even more exciting and ambitious proposition that should result again in best-in-class total shareholder returns. Both Unlocked and Unlimited not only deliver for our shareholders, but greatly motivate our management and broader team alike. As such, M&A remains not a necessity, but an accelerator, executed only under our strict terms and only when it creates incremental value for our shareholders. We only execute when there is a clear strategic fit and the returns are superior to our share buybacks.

Our discipline has already been proven. That said, we do retain unique optionality across 2 strategic states and 13 markets. Our winning proposition, strong momentum and forward-looking strategy with its related granular, simple levers to execute it leads to our ambition for UniCredit Unlimited. We aim to deliver once again the best combination of net profit growth at leading return on tangible equity and distributions within the European banking sector, supported by a dynamic, higher quality top line and a lower cost base, all resulting in achieving a decade of unmatched performance.

We continue to believe that guiding on net revenue is more aligned on how we manage the business as the combination of NII, net of the related LLPs and fees and net insurance are interconnected in multiple ways and cannot be seen separately. All numbers that I will go through now are post the restatements I just described earlier. We aim to grow net revenue at a 5% compounded annual growth rate, reaching sound EUR 27.5 billion by 2028 and directionally exceeding EUR 29 billion by 2030 and beyond. In terms of growth levers, we aim to accelerate core revenues net of LLPs at 4% CAGR while absorbing Russia compression, 5% CAGR without it. Benefit from the contribution of our Commerzbank and Alpha investment growth, net of hedges that shall reach EUR 1 billion by '28 and more than compensate Russia.

Cost of risk should remain stable at 15 to 20 basis points. Overlay shall be used as required to support that expectation. We aim to reduce our cost by circa 1% per year net of investment and other headwinds to around EUR 9.2 billion by '28 and below EUR 9 billion by 2030, leading to a cost/income ratio of circa 33% in 2028 and below 30% by 2030. As such, we aim to increase our net profit by 7% per year to circa EUR 13 billion in '28, increasing our RoTE to above 23%. Such trajectory is directionally set to continue towards 2030 and beyond. As a reminder, we can rely on a combination of substantial unique buffers to defend that performance. EUR 1.7 billion of overlays, more than EUR 4.5 billion of excess capital, EUR 1.4 billion front-loaded extraordinary charges, EUR 1 billion additional revenue from equity investment that are fully distributable.

Our trajectory is underpinned by quality profitable growth, operational excellence and capital excellence. On the top line, we aim to grow more than the peer group, both in absolute term and in quality with a stable and controlled cost of risk. On cost, we aim to reset the efficiency frontier, shifting transformation from simplification to reinvention. On capital, we aim to deliver the best combination of profitable NII and rising capital-light revenues, all while maintaining one of the strongest balance sheets in Europe. Together, this will result in EPS growth and return on tangible equity at the top of the peer group. Our distribution policy reflects our confidence in the sustainability and quality of our earnings.

We confirm 80% ordinary distribution split between 50% dividend, 30% share buyback. The mechanical result is cumulative distribution of circa EUR 30 billion over the next 3 years and EUR 50 billion over the next 5. This equates to a best-in-class distribution yield before considering any deployment or return of our more than EUR 4.5 billion of excess capital evaluated yearly. The numbers above do not include the EUR 9.5 billion of planned distribution for 2025. When you bring it all together, growth, efficiency, profitability, capital generation and distribution; UniCredit stands apart. We deliver the best combination of return on tangible equity, EPS growth and distribution yield among major European banks. Performance of this magnitude should be reflected in a premium valuation, providing further relative upside going forward.

To conclude, UniCredit Unlocked transformed our bank, proving what disciplined execution; empowered, motivated people; and a unified operating model can achieve. Our performance confirms the effectiveness of our model, resilient, diversified, efficient and relentlessly focused on value creation. We have delivered another record year with 20 consecutive quarters of quality profitable growth, and we are entering 2026 with an unmatched momentum. We now shift decisively from unlocked to unlimited, a new phase defined by greater ambition and a fundamental rethinking of how a European bank should operate.

UniCredit Unlimited is designed to transcend legacy boundaries, pushing beyond traditional banking limits through disruptive change supported by technology and AI and continued convergence of our operating model. Our people remain the linchpin of getting us there. Our superior equity story speaks for itself, market-leading growth at best-in-class return on tangible equity and an unmatched distribution trajectory, all achieved within Europe. We have M&A optionality that others do not, and we will continue to exercise the same discipline. These banks was transformed once with UniCredit Unlocked, and we are determined to do it again with UniCredit Unlimited, delivering a decade of outperformance.

Thank you very much, and we'll open to questions.

[Operator Instructions] The first question is from Ignacio Ulargui of BNP Paribas.

I will just make one in the interest of time. So I mean, if I just look to the plan, I think one of the biggest changes is the loan growth that has been changing throughout the last couple of months. Just wanted to get a bit of sense of how that 5% growth will be distributed between regions and products. Andrea, you made a couple of comments about the most profitable segment. Just wanted to get a bit of a sense on how does mortgages, SME and consumer interact on that basis? And also linked to that, what has changed really for the bank to move towards that stronger organic growth ambition?

Okay. So I'll start with what has changed, and then I'll move to loan growth, and I'll pass it to Stefano. So what has changed? The momentum we see in our business. We closed 2024 indicating that we were shifting gear and moving to accelerating growth. During 2025, if you take away all the noise, we saw that crystallizing and crystallizing better than we expected. And therefore, that gave us more confidence. As we moved into the second part of the year and in the fourth quarter, we see a momentum on all of our operating indicators; NII, fees and net insurance cost to be better than we expected and strong. And that has given us the confidence on, let's say, doubling down on the acceleration of the top line.

The second thing is during the course of '25, like many others, but especially ramping up into the end of the year, we have not only continued to look at how we could continue to improve ourselves through change, through transforming the way we operate, but increasingly adopting AI and accelerating the move of new technologies into the bank. And this is just a question of acceleration. And as we did that, we witnessed that the time to achieve both improvement of that transformation was significantly faster, the impact greater and therefore, that we could apply what the team has been executing in terms of transformation over the last 5 years, but now we could attach it to tools that make the LEAP much greater on the same basis.

So fundamentally, the entire processes that we would be before redesign, much more efficient, now we can redesign them and totally converge them AI-based and the leap is materially greater. So these 2 things occurred. This is combined with a realization at least of mine and the management team that we can no longer focus on competing among legacy banks. Fintechs and hyperscalers are a reality. They are entering Europe strongly in every market. And we need to have the ambition to transform a lot more to catch up on the operating side in order to reach 2030 as a bank or as an institution that can compete successfully not only with legacy banks, but also with fintechs and hyperscalers. And therefore, all of this together has given us the motivation, the tools, the drive, and we have been doing that for 4 years. We're putting it forward.

So it's just a stepping up and a doubling down on the acceleration of the top line and on the transformation of our model. With respect to loan growth and growth in general. As you have seen; every single market, region, country in which we are; we are seeing a materially improvement of momentum across loan volumes, across NII. And this is very important. We have succeeded to date and intend to continue to succeed to, yes, step up our growth, yes, take market share, but defend margins. This has been a constant for us. And it's not a constant that is going away. I keep on repeating that EUR 1 billion of loan growth is worth 1/3 of 1 basis points of decline in margin. And therefore, going for volume and not margin is not a value-enhancing proposition.

So we've seen that. And what is happening out there is that we have been very clear, and we've already done that increasingly in the last 5 years, but especially in the last 2, we're targeting growth. In the same way, we are targeting efficiency across the chain. We're targeting growth. Where are we targeting? In markets where we think the margins are better, our geographies. So for example, Central and Eastern Europe provides excellent opportunity to grow fast at margins that are sustainable with a high profitability, we're doubling down on that. But even within countries, there are regions within Italy that grow faster than others, we're doubling down in those regions relative to others. We always try to sustain our margins, our return on tangible equity of that. And that is very important.

Secondly, client segments. Client segments are not equal. The margins, the profitability of large corporate, of medium corporate, of small corporates, of micro businesses, of private, affluent and mass are not equal. And we are privileged to have 60% of our revenues already skewed in the "most attractive segments" of SME, including micro, affluent and private. We want to increase that. And in many of those segments, the competition is fragmented and fractured, especially the more fragmented segment like small and micro businesses. And it allows us to gain shares in segments that are naturally higher margin, but with a competition that is less pressing. To do that is not as simple as saying, I'll do that.

You need to have the credit models, which we have prepared for the last 2.5 years. You need to have the people trained. We have been hiring on the front end or recycling our own people to the front end for the last 3 years. You need to have the IT platform to be able to support them. You need to have the AI to personalize what we are offering. You need to have all of these things prepared to address them, we do. Then you have the products and in the products, again, the margins on a mortgage in Italy, for example, are nowhere close to the margin, and all of this is net of cost of risk on a consumer loan. We have been saying for now 4 years that our focus is on margin, not volume. So we would take the volume hits in mortgages, not because we don't offer them, we do. But because we don't drive them while we wanted to gain leadership in consumer credit, which is a critical pillar of supporting families in their spending. We now are a leader in consumer lending.

Our cost of risk is below everybody else's and the margin are multiple times what we would get in mortgage and certainly multiple times above the cost of equity. We will continue to do that. Some competitors have noticed and are trying to imitate. Good luck. You need the models. You need the platforms. You need the people. You need the training, and you need to know how to do it. We've learned very well in the last 4 years, and this is a DNA of UniCredit that comes from the early 2000s. So we have it. Not many people do. That's an example in lending. But when you look at investment, it's the same thing. Money market funds does not have the same margin as a capital guaranteed certificate as a unit-linked, as a wrapped mutual fund under one markets. They address different client needs.

And if I may, as we discuss the performance that I always get as an answer in fees, and I have not been able to convey that it is connected because what has a higher margin, a current account, a 0 remuneration or a money market funds. I'll let you decide on the answer. And hence, we have massively outperformed in NII and its margin this year and performed in line on volumes of fees. But all in all, we are ahead. So we treat everything we do crossing geographies, clients and products in this way. And we have developed platforms and factories that are now truly best-in-class, more modern, more AI-based, more dynamic in the responsiveness. But I'll pass to Stefano on the numbers for the loan growth, et cetera.

Yes. So products, retail, reiterated focus on consumer financing as highlighted by Andrea. In relative terms, this is for geographies like Italy, Central and Eastern Europe and Austria. On mortgages, lower loan growth in comparison to consumer financing in relative terms in the next 3 years with a differentiated growth between Germany, Austria and CE in comparison to Italy for the reason highlighted by Andrea. Segments, more focus on getting market share in small business and small enterprises. However, we are expecting a higher growth than the past in the mid and large corporate segments, especially in Italy and in Germany.

With regards to the geographical areas, let's start from the GDP assumptions because that's very important for us. So our assumption in terms of GDP considering our footprint are for a higher GDP than the Eurozone one, so around 1.2% for '26, increasing to around 1.7%, 1.8% for '27 and '28 with an average inflation that is slightly higher than 2%. Why I'm saying to you this because what we are expecting in light of the commercial action that we will put in place is a growth rate for the lending in line with the nominal GDP rate in CE and in Austria, while higher than the nominal GDP rate in Italy and Germany.

The next question is from Hugo Cruz of KBW.

So a couple of questions. One on OpEx target, which optically seems aggressive, but you talked a lot about the impact of technology on that. I was just wondering if you could give a bit more color both on integration charges if you have to book everything in the later years? And how do you expect the staff cost to evolve versus other admin and D&A to reach that OpEx target? And then a question on the hedging. You're booking the one-off hedging costs in Q4. What does that mean exactly for the Commerce and Alpha hedges? Are you extending the hedges for longer? And also, should we continue to assume that these recurring hedging costs for those stakes are around EUR 350 million a year?

Yes. So in relation to OpEx target and evolution of cost over time, let's start from '25. So in '25, if we're excluding change of the perimeter, the costs were down around 1.8%, both on an HR cost and non-HR cost. On the non-HR cost, we have been able fundamentally by the reduction of the real estate cost to more than compensate the increase of cost in IT and marketing. When we look to the future, the trend of cost will be driven by the reduction of the HR cost. So the average number of FTEs of the group will go down during the course of the next 3 years and the connected HR cost.

In relation to the non-HR cost, while we will keep on focusing on further optimizing the real estate costs that are expected to go down, the other administrative expenses, especially the IT one are not expected to go down, so are expected to be higher in light of the planned initiative that we have from an IT investment standpoint considering all the specific actions that we have discussed before.

In relation to the hedging, we have lengthened the duration of our hedging in Q4. It's a dynamic hedging. So what we are expecting is to do that over the course of the next years as well. You need to expect a recurring cost of hedging. So in our ambition, we are including in the contribution from the investment that Andrea commented before, the hedging costs are included, and we are expecting to have an average hedging cost in the next 3 years of around EUR 500 million per year with a lower cost in 2026 for the action that we've taken and a progressive higher cost for '27 and '28.

The next question is from [indiscernible], Goldman Sachs.

Just going back to one of the first questions. And also at the start of the call, you said that the unlimited strategy is kind of fundamentally reimagining what the bank looks like in the next 3 to 5 years. Could you kind of elaborate a little bit more on how you see that the banking environment transforming in Europe over the next 3 to 5 years? How many -- like how do you see that the fintechs and the hyperscalers entering the market? How do you see competition from these banks increasing? And kind of how do you see the larger and smaller European banks performing in such an environment?

And then the second question would be on M&A. I know you made quite a few kind of comments throughout the presentation that you have the M&A optionality. But kind of how should we think about M&A in the revenue guidance and what that could potentially mean in terms of upside risk? And also, if you could comment on your relationship with Generali?

Okay. So let me start with the transformation, et cetera. So I just think that it is -- if you look at how we looked at the sector in 2020, exiting COVID, there were legacy banks that were getting back on their feet. There were various fintechs. There were hyperscalers. There was a relatively limited amount of competition. Over the last 5 years, it changed dramatically. First of all, if you take fintechs, a number of names come to mind, they are now not only curiosity, they are a reality in many markets. Now they tend to have lots of clients, but few primary clients, but they are a reality, and they are growing fast and they're learning.

If you take hyperscalers on what they offer clients in terms of financial services, it's the same. I would add to that, that we now see, for example, U.S. Bank entering quite aggressively in some of the European Union markets and non-European Union markets, leveraging the higher spending technology, leveraging the relative regulation, et cetera, to gain share in the places where it hurts. So I don't think or I'm actually convinced that if you look at it 5 years from now, you don't have these, as we like to play with them balkanized competitive environment with legacy bank on one side, fintech on another, hyperscaler on another, foreign banks on another, you have one. And clients are going to look at one. And you need to look at those competitors and say, what am I missing?

I think in general, legacy banks are much better on trust, are much better on quality -- on memory clients, are much better on multiple complex products and solutions, are much better at human touch. They are much worse on all the operational setup behind, on the client experience and on the service. But the flip side is that, for example, fintechs and hyperscalers have exactly the opposite problem. They need to converge where we are on the client side and on the front end. We need to converge where they are. So if you look at transformation, you need to look at a situation where we defend the front end, the primary clients, the product and everything else, providing our people with the tools, AI, technology to improve the service. Otherwise, the clients will walk away.

On the other hand, we need as an urgency to become much more efficient, much faster, much more dynamic than we are on our operating machine. I'll give you one order of magnitude. If you took us in Europe, in Italy, in 2020, we probably were loosely defined about 50% of our people were at the front and 50% of our people were at the back. If you look at it 3 years from now, probably the back will be 25% and the front will be 75%. So there is a massive recycling of skill set of our colleagues from back to front as we render the entire machine much more automated, AI-driven, et cetera, et cetera.

But there is also more tool at the front to allow them to provide a better service to client. I honestly do not think that if you have that, clients would prefer to be 100% serviced by a chatbot rather than a human being. So I don't think this is the death of human being. I think this is a huge opportunity for legacy banks to take back the baton. So in that, this is what is inspiring everything we're doing internally. Every process is reviewed, the organization is reviewed. The way of working is reviewed, nothing is sacred. And if we can do it faster, cheaper, better without taking undue risk, we go for it. And I think that this bank demonstrates that we like to take those decisions, and we do thrive in change, and we're going to demonstrate that over the next 5 years.

With respect to M&A, I think I mentioned it because it is a question I get all the time. I always have -- I always hope that if I say it, I don't get any questions on it. But what I would say on M&A is Europe needs bigger banks. We are dwarfed vis-a-vis the U.S. and the other economic blocks. Also, bigger banks are necessary to fund the transformation that the European Union needs to undertake. Where is the money coming from? The gasoline comes from 2 places and 2 places only. Capital markets, we don't have them. And banks, we are dwarfed. So Europe needs that to fund all the ambition that we have, point number one.

Point number two, M&A done at the right terms and the right strategic fits can add significant value. It is usually -- and I have done 35 years of that, no replacement for a bad strategy, a bad plan and a bad execution on an organic basis. We have a great strategy, a great plan and a great execution on an organic basis. We don't need to do it. Look at the net profit growth and at the distribution. We are privileged. We have more optionality, we look at it. We will look at it in the same disciplined fashion. As I said, we moved a little bit as I was told to be too conservative, and we look to beat the share buyback return plus the margin and not 15% return on investment anymore to align to where the cost of equity for European banks have gone. But nothing changes.

What is in our earnings? In our earnings, there is 0 deployment or return of excess capital and therefore, 0 acquisition. Obviously, very small bolt-on should be putting a stride on the circa of the numbers that we're giving you, but anything more significant should be added. I think in Central and Eastern Europe, you look at bolt-on that usually go from anywhere between EUR 5 billion -- EUR 500 million and EUR 1.5 billion. So those are relevant for the excess capital. In larger markets, our 3 larger markets, they are not relevant for excess capital because anything that we would do there would require a capital raise and would need to be very well benchmarked against does that derail other plan? Does that defocus our people or not? And secondly, do the return justify it? And this is what we do. With respect to Generali, I think we speak to Generali regularly.

They're one of our industrial partners. People forget that they provide most of our bank insurance products in Central and Eastern Europe. We distribute their asset management products within our network. So of course, we talk to them. The rest is a little bit fantasies of people who need to create stories, but there is nothing else on that topic, not that I know of at this point.

Next question is from Britta Schmidt of Autonomous Research.

On the capital trajectory, I mean, previously, you've guided or given us some sort of indication of what organic capital growth per annum can be in the plan. Could you maybe give us some thoughts on that now that your volume target is more ambitious and tell us what the RWA growth if that is aligned with this plan? And then how do you think about the largest execution risks of this plan? Is it a weaker macro? Is it perhaps the risk that the cost benefit might be completed away and the AI benefit may be completed away or also the timing of AI deployment and regulation around that?

Maybe I'll take the second, and then I'll pass to Stefano on the first one. So the execution risk is obviously always a question of grades. But I think weaker macro affects us. But if you look at what has happened in the last 5 years, I don't think that, that is that significant. I think, obviously, within reason. But I think what affects -- what would affects banks is, number one, if competition steps up at unreasonable levels and people to just grab volume to try and deliver growth that they otherwise don't have, stop dropping margin and become not realistic. Yes, possible. I see it difficult, particularly in this environment and particularly given the capital that people have in Europe to deploy in value destructing volume. So I think the risk exists, but it is limited.

Secondly, I think regulation is at the moment quite clear where it's going. It is still tightening, but it's fully embedded in the plan. I would have hoped that it stops tightening, given that we are where we are. But regardless, it is fully embedded in our plan, what we know today. I think the rest is the ability of our organization to not only continue to change as we have in the last 5 years, but step up that change. I'm very confident of what the team can do here. But the degree of change that, one, you need to fathom, taking a step back and looking at what is possible with modern technology and AI; and b, the decision that you need to take that completely disrupt the things that you're doing and how you have been accustomed to do them for a long time is tough.

I think this team is uniquely positioned to do that. And there are a lot of indications that they are, but it is tough. And finally, we always talk about all this, but let's be very clear, for UniCredit, this cannot be done without taking control and dealing with the social impact. We have invested a lot in our university. It gave more than 1.5 million of hours last year to our people. This should be stepped up and almost doubled as we bring people along and we upskill, reskill and move them. But the disruption is there.

And I think one thing is an Excel spreadsheet. Another thing is to doing this to people. So I think the organization needs to be given the time to absorb and do that recycling in a correct way. So these things, if you look at the numbers on the plan, we use a lot of circa. And we leave a lot of circa because if I take a spreadsheet and I look at all the things that we have identified that we can do better, Britta, I mean, the numbers are a lot better. But time, how adoption, recycling, dealing with the social impact is going to delay and correctly so the implementation of what we do.

And I cannot judge that, and I do think that most CEOs cannot judge that because a lot of these changes are new, and we are not accustomed to dealing with them. So on the one hand, you want to accelerate, but then you immediately see the consequences and need to adjust for the consequences and manage them. So that, for me, that speed, we will see this year and next year, that would adjust the plan one way or the other. But at the moment, we are quite confident in the numbers we are aspiring to get and they remain what they are. I'll pass you, one second, to Stefano.

Organic capital generation, we are expecting to have an organic capital generation at least equal to 80% of the net profit in the plan in order to support the distribution that we have communicated. Net profit, you have the assumption, risk-weighted assets. So we are expecting to have loan growth and as a consequence of that, growth of the risk-weighted assets, let's say, an average in the plan more than EUR 10 billion per year. However, more than EUR 10 billion capital efficiency actions per year, right? So that's why we are confident on the organic capital generation trend. Having said that, we do expect some effect that you need to take into consideration that will bring up the risk-weighted assets that are, one, operational risk-weighted asset, the more we go up with the revenues, and we're expecting to go up with the revenues, the more we have risk-weighted assets. So around EUR 6 billion in the next 3 years is important for you to take that into consideration. And then when we do the Danish compromise, you have the benefit from that, but that will increase the risk-weighted asset once we will do the Danish compromise, and it is around the EUR 6 billion, okay? Then we have some model changes and regulatory impact. The Basel IV are not material, let's say, around EUR 3 billion, then it will depend on the fundamental review of the trading book in terms of also timing of that. But we are expecting also around -- over the plan, around EUR 10 billion of risk-weighted assets that have been from model changes. Everything taking into consideration, the risk-weighted assets are going to be higher already in 2026. We're expecting something more than EUR 310 billion already during the course of 2026. Everything is factored in, in our organic capital generation and distribution trajectory.

The next question is from Andrea Filtri, Mediobanca.

I link to Britta's question. I calculate abundant generation of excess capital over the next years. Do you agree that growth at this point supersedes capital return as ROI of share buybacks is lower than organic profitability and most M&A transactions? Second question, as you look into 2030, how are you approaching the adoption of the digital euro? And how can you make it into an advantage for UniCredit? Finally, clarification, you indicate a delay in the Danish compromise approval. Why is it taking so long versus prior similar cases?

Okay. So excess capital and everything else. I do believe that there has been coming out of ready '24 and now increasingly '26 to '30, one needs to combine and our strategy is exactly doing that, profitable growth with distributions. We strongly believe that we've moved from maximizing the distribution to shareholders, which, by the way, we pioneered into keep those distributions at what is still a very high level because let's call them what they are, they are outsized. But trying to capture market share and growth opportunity in the outside world because over time, an organization that does not grow for a long period of time dies.

So we think there is plenty of opportunities in the market where they are for us to grow market share, but plenty of opportunities across client segment, across products. Every opportunity that we have to deploy capital profitably, we believe will then mechanically enhance distribution going forward because we are committed to an ordinary -- not total, ordinary distribution payout of 80%. So the more I grow, the more profitably, the more I have net profit, the more I distribute as opposed to grow less, have lower net profit and top up with excess capital.

I think we've moved from that. And I think it's a lot more sustainable to have profitable growth at high ROTE, generate more ordinary distribution and deploy the capital to get there. And the returns, as you have indicated, Andrea, I agree with you, for now, they are much better than purely share buybacks. The only -- the reason we are keeping share buybacks in there is because I think it's a question of discipline. We need to be disciplined to return to our investors and to our shareholders what we don't use. So either we are good enough to use it at a profitability level that is above the one of a share buyback or we owe the money back to them. And therefore, we will continue to do that.

But if you like, psychologically, the emphasis is on profitable growth while maintaining this high level of distribution at 80% that we have achieved rather than trying to maximize returns at decreasing returns for our shareholders. So this is what I would look at. The second thing, adoption of digital euro, I would take a broader context, Andrea, and I know you have been discussed a lot about that. My broader context is there are a lot of things changing in the digital assets, from digital assets to digital -- to stablecoin, to digital euro, to all the blockchain supporting it, to the settlement part with the European Central Bank, PONTES, which then will evolve further into something more blockchain driven. We need to be central to that. We need to address that.

So we recognize we are at the beginning, but we are leading most of the initiatives in Europe across stablecoin, across tokenization of assets, across what the digital euro should look like and what it should do in order to disrupt -- to not disrupt, but help. And across also crypto, not because we necessarily want to push it, but if we have clients that want it with the appropriate warning, we need to also respect that wish. I think this is very important. We talk a lot about sovereignty and the digital euro. Let me leave you with one concept that we have at UniCredit. What about the sovereignty on stablecoin?

If you go to Asia, all settlements are stablecoin denominated in dollar. If you were to step up on tokenization of assets in Europe, all settle on stablecoin denominating in dollar. So even before the digital euro that I see more a retail directed thing at the moment. On all the corporate segment, we need euro-denominated stablecoin. This is what Qivalis is trying to do, and we're going to start deploying or rolling out in September of this year. With the Danish Compromise approval, I think I will give you a broader answer because I'm not controlling who should give that approval.

I think given the fact that in the last 1.5 years, maybe 1 year, 1.5 years, the Danish Compromise has been used in increasing cases, and the perimeter that it has been applied to has been used in cases that, in my opinion, the regulator did not anticipate it would be used into, but then needed to go back and look at the regulation and look at everything that goes with it. There has been an attempt, and we're not the only bank that is waiting. There are 3 others in the queue. We are the more significant. There has been an attempt to look at the entire framework and make sure the process that is followed and what the framework allows or not allows is well clear and justified for everybody. That is done now.

So we have cleared that stage end of last year. And we are told that it is only from now that the actual end of the stage, the actual physical Danish compromise is going to be evaluated. So the clock "started later" because of all of that. I think futures will probably benefit from this framework, and it will be going back to being a little bit faster, but this is what we understand is the case.

The next question is from Noemi Peruch, Morgan Stanley.

The 2028 net revenue target is EUR 3.6 billion higher than 2025. Could you please break down the absolute increase in NII fees and investments post restatement? And then I have a question on Alpha. You both have been talking about the synergies that you can achieve with the current setup. So if possible, could you please elaborate on the strategic and industrial pros and cons of a full takeover instead of the current setup unless you would dismiss such scenario to cool?

Okay. Let me start with 2 things and then Stefano will complete. Firstly, I think some of you have asked how ambitious, how not ambitious, how many moving parts, et cetera, et cetera. I mean, we believe that slicing and dicing is done on guidance, contrast with the business. And we will no longer break down in any indication, aspiration, guidance, NII from fees and net insurance. The reason we do that is because if you look at 2025, we guided at the beginning of the year that we would have an NII declining 7.5% to 8%. We finished the year at 5%. That was in large part due to great work by our people in managing the pass-through as they manage the pass-through and they reduced the decline to circa 5%. They obviously had less growth in fees from investments because less market funds, less other things like that. In the same way, as we had been pushing in the last few years, fees from investment, we reduced the growth and lost some market share in unit-linked. These things are all connected. I push more capital guaranteed products. I have less asset management. I have different NII. The breaking of that down, which I know what they are, but prevents the network and the empowerment of our people in every single bank because it forced them into bracket. And when the macro of the opportunity changes, there is immediately a worry that if they move on what is right, they're going to miss consensus on one subset or other, and therefore, you delay the right decision. And because we believe in empowerment, we'll keep them aggregated like that going forward, at least in terms of guidance. Obviously, when we report results, we will give you the numbers, and we will explain why they are what they are.

With respect to Alpha, I think Alpha has been a fantastic accident for me. I used to not believe in anything that was -- we're going to do a joint venture, we're going to do a partnership, et cetera, et cetera. In the past, one of my ex-CEOs was saying that the joint venture partnership were same bed, different dreams and never ended up well. This is totally the opposite with Alpha. We started to help Alpha complete its privatization because we thought that the investment was worth it, obviously, and to support what we did in Romania.

Since then, we stepped that up. The level of cooperation and the level of dialogue that we have between our factories here in Milan and Alpha is in certain cases greater than what we have with bank we own 100% of. There is a total embracing. The 2 teams work extremely well together. There is a very good crystallization of the value we bring to them and the value they bring to us. And this is driving not at my level or at the level of the Executive Board, but at the level of the operating team, a constant request and adjustment for new opportunities to cooperate among things. So there is no way, if I combine that with the positiveness with which not only Alpha, but the entire Greece has welcomed us that we are going to upset that in any way and anything we would do with them is only both sides felt that there were more value to be created and better value to be created. And we are not at all stressing because the value that we are creating is quite high already.

It also demonstrated that given the framework we have generated in our federal group, we can add significant value cross-border in a market where we're not because we're not in Greece and all the value that we're creating has nothing to do with the merger or anything else. That is inspiring us from other things that we are doing. Now obviously, in an integration, there are a number of other things that you can do that you cannot do in a partnership. There are substantial, let's call them, cost advantages in our procurement contracts, in our cost of IT, in our cost of AI because of our scale and where we are. There are other advantages, especially in the operating machine.

There is the blueprint that we believe we have in -- especially in retail. The advantages that we see in Alpha in corporate. There are a lot of things that at the moment, we're trying to maximize without a merger. So it's a soft association. We are happy. There is something more that obviously only a merger can give, but it is certainly not something that we want to do upsetting the current state of play. So we are very happy as partners. So for the time being, this is as it is. As you know, the alpha stakes does not absorb much capital, actually marginal, but it does deliver a lot of returns, not only through the consolidation, but also through the fees we book. And I'll leave you -- maybe I'll leave Stefano comment on that.

So I think -- I know that everybody wants a process on a time line and when we are going to do it. We may not do it ever and be very well connected one way or the other or we may do it at some point because both sides feel it's the best for their people and their shareholders, but there is no plan whatsoever on it, and it has never been discussed.

So first question, reclassification, as highlight by Andrea specifically before. So the reclassification that we start doing from Q1 is neutral from the revenues standpoint is positive for net interest income EUR 700 million, is positive for fee around EUR 100 million more, is negative for the trading EUR 700 million and it is negative for the balance around EUR 200 million. Specifically in relation to the balance, do consider that there are the securitization cost, i.e. in the next 3 years, do consider that the sum of trading and balance will go down because we will have more cost for securitization for the reason that I told you before.

So we will keep on executing important capital efficiency actions, including securitization. So this will affect balance and the sum of trading and balance accordingly is assumed to go down during the course of the next 3 years. The other 2 important components are the net interest income plus fee and net insurance if you're excluding Russia, what we are expecting is a compound growth rate in the next 3 years of more than 5%. And then you need to consider, as already commented before, that the contribution from the investment net of hedge will more than offset Russia compression. However, the Russia compression on the top line, especial in 2026 will be material.

In relation to Alpha, the sum of what we are getting in terms of dividend and equity contribution plus the business that we do, considering the capital absorption that we have is bringing a return on capital that is over 15%.

The next question is from Andrew Coombs, Citi.

Firstly, on Slide 51, you provide your forward rate assumptions. I think you've got one hike embedded into your plan in 2027. Can you just give us an indication of what the sensitivity of the revenues are in your plan should those rates either end up 25 basis points higher or 25 basis points lower? And then the second question on provisions. You've obviously had a period of declining or stable NPEs. There is an ever so slight tick up in the gross NPEs this quarter, 2.6% to 2.7%. The coverage ratio is edged down. Perhaps you can just give us a little bit more on the drivers of that during the quarter and what's embedded into your assumptions for the through-the-cycle cost of risk guidance going forward?

So first one, yes, you're right. We are expecting in the next 3 years, an average Euribor around 2% for this year, 2.1% in '27 and around 2.3% in 2028. There is an assumption of a rate cut at the end of 2027 for 25 basis points, just that one. The net interest income sensitivity, plus/minus 50 basis points is around EUR 300 million in terms of impact to the revenue, meaning reduction of the rates, EUR 300 million less. Otherwise, it's EUR 300 million more in case of rate increase. That's the sensitivity.

In relation to the provision in the quarter, let's look. So the default rate of the portfolio was around 1.3% for the overall group, was 1.3% for Italy, was 1.4% for Austria and 1.5% for CE while it was around 1.1% for Germany. When we are looking at the overall trend of the portfolio, it's fundamentally stable in comparison to the previous year. In relation to the trend of the default rate in the following years, we are expecting a slight increase in default rates. This is what is embedded, but we are not expecting any significant -- neither in the evolution of default rate nor in the evolution of the NPE ratio, meaning, yes, we can have some slight adjustment like what happened during Q4, but nothing specific or problematic.

The strategy of the group is the same, meaning a combination of ordinary workout management plus sales when necessary. Cost of risk, as commented, we are expecting a cost of risk from 15%, 20%, including overlays, if required.

The next question is from Antonio Reale, Bank of America.

Just a quick question on the moving parts of your revenue line. You've added another EUR 10 billion or so to your replicating book this quarter, which is a big number. You're now just over EUR 200 billion, and this is a clear tailwind to your net interest income growth. Then you've talked about pursuing growth in loans and deposits without diluting margins. And I think we all understand what that means. So net of restatement, I'm trying to understand what does this all mean for your NII growth here and how that squares up with the growth in fees insurance given all the work you've done and are doing our product factories.

Yes. So replicating portfolio, you mentioned replicating portfolio. Yes, we are currently over EUR 200 billion of size of the replica on the hedging. We're expecting to have a positive contribution from replica of around EUR 400 million for each year in terms of contribution. We are expecting to have a net interest income increase, a progressive increase of the net interest income when we look '26, '27, '28, especially considering the impact from Russia that, as I told you, is higher on the top line and especially net interest income as assumed especially in '26.

Next question is from Delphine Lee, JPMorgan.

Just really 2 quick ones. Just on fees and commissions, if you could just tell us sort of what is your assumption on your current partnership with Amundi, which is maturing soon? And any impact -- negative impact that you factored in already in your plan? Then the second question, you've talked a lot about how sort of AI is going to improve your operational efficiency. If I'm not mistaken, I sort of heard earlier in the presentation that AI has already reduced your IT cost by 30%. Just wondering sort of how much more do you expect on the cost side in terms of reduction from AI specifically?

So on Amundi, you all know that the contract that we had ends mid-'27 and therefore, it ends mid'27. Until then, you have noticed that we have increased the volumes with other providers and we've won market. Every time we do that, we pay them a penalty until obviously '27. And those penalties have been paid, and we have taken a provision on those penalties -- for most of those penalties that we anticipate for this year and half of next. So that's that.

With respect to AI, look, it's very difficult to tell you. I think I will refer to the same thing that everybody will tell you. If you take processes like large corporate credits process, if you take transaction monitoring, if you take KYC, onboarding, if you take onboarding, if you take all of these very analysis or labor-intensive processes, these processes, once they are redesigned, can be made more efficient, not by -- I mean, by very high percentage numbers, double-digit percentage number. Obviously, not every process in the bank can be done that. So you need to do it. And as I said, in order to do that, first, you need to redesign, then you need to determine how you're going to absorb people and then you need to do it.

So this is why we continue to say circa, we took a, let's call it, a number that we feel is comfortable, but the adoption or the impact increases between '26, '27, '28. We would not have been able to step up the investment the way we wanted to step it up and still take cost down 1% per year, which, by and large, is about EUR 100 million per year on a net basis without not only stepping up on our change, but using -- but supporting that change with AI. But I don't have more than that at the moment. I would be just speculating.

The call has now concluded. Thank you for your participation.

Thank you very much.

Good morning, ladies and gentlemen. Before I hand over to Ms. Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded.

Madam, you may begin.

Good morning, and welcome to UniCredit's Third Quarter and 9 Month 2025 Results Conference Call. Andrea Orcel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano, our CFO. As always, please limit yourself to two questions.

With that, I hand over to Andrea.

Good morning, and thank you for joining us. Today, I am proud to present our record third quarter that completes the best 9 months in our history. These outstanding results have been delivered, thanks to our people. Their professionalism, ownership, passion, determination and search for excellence are the foundation of everything you will hear today.

Our message is simple. UniCredit is about sustainable, best-in-class performance today while steadily building for tomorrow, all supporting best-in-class sustainable shareholder remuneration. We remain proud of what we have achieved and confident in our future trajectory because our strategy works, and our execution is unparalleled. This is true across every region and business we operate in.

These results mark our 19th consecutive quarter of quality profitable growth and a clear beat across net revenue and all its core components, cost, capital, net profit and return on tangible equity. It is a quarter that defines great performance, great prospects and great returns for our shareholders today and over time.

We have reinforced our double-digit growth trajectory in EPS, in DPS, in tangible book per share while maintaining a return on tangible equity above 20%. We confirm our dividend and share buyback guidance. We continue to grow in a quality way. Net revenues are up in the quarter and broadly stable over the 9 months. This is remarkable given the challenging macro environment in which we are operating. It shows that UniCredit is capable of growing through the cycle, supported by an increasingly diversified top line that remains highly resilient and will quickly pick up as soon as the impact of a rates decline is absorbed.

Costs continue their downward trajectory, supporting a best-in-class cost/income ratio. Capital efficiency remains excellent with a top-tier net revenue to RWAs. Net profit is up 4.7% in the quarter and 12.9% in the 9 months, all at a 22% average return on tangible equity. All our asset quality metrics remain solid and stable. Net NPE, decreasing. Cost of risk contained with no signs of credit deterioration. Overlays intact at EUR 1.7 billion or 40 basis points of yearly cost of risk, a further defense against any future deterioration of our strong asset quality.

CET1 ratio remains well above our target range and among the strongest in Europe. Liquidity remains sound with LCR above 140%. Net profit guidance for 2025 remains at EUR 10.5 billion, although we are now considering management actions to be expensed in Q4 to further propel our future result mostly from '27 onwards. These actions are focused on investment for growth rather than investment on efficiencies as they were in the past. The early deployment of EUR 6.5 billion of our excess capital and absorption of related upfront costs will add EUR 1 billion of net revenues and net profit by 2027, growing from there at a fixed capital consumption and largely protected by put options.

Residual 2024 share buyback of EUR 1.8 billion will start by the end of October and as early as the end of this week. EUR 9.5 billion in dividends and share buyback for 2025 are confirmed with an interim dividend of EUR 2.2 billion paid on 26th of November. Ordinary distribution policy from '26 onward of 80% of net profit is confirmed. This is practically equivalent to the 90% of previous net profit but did not include the impact from investment. Such ordinary distribution may be complemented by excess capital return evaluated yearly as we did in the past.

The Italian Government has released a draft bank levy. It is premature to assess its impact as it is still under discussion. UniCredit will dilute any hit, thanks to our geographic diversification. As always, we will do our best to minimize its impact on UniCredit, our shareholders, our people and our clients. We will release more detail once this is finalized.

Our performance this quarter further strengthens our unique equity story, one of the most compelling in European banking. We're delivering beyond what we promised. We have further strengthened our earnings and dividend and capital deployment trajectory as we accelerate the execution of our winning strategy, building even greater confidence in the sustainability of our performance.

Our equity story is rooted in our DNA of excellence, something that sets us apart from our competitors. It enables us to deliver consistently in the short term while building long-term sustainable value for our shareholders. This performance gives us a foundation and the confidence to outperform in Phase 2 of our strategy, accelerating growth, driving efficiency further and innovating to meet the challenge of fintechs.

Our capital allocation decisions are a core element of our equity story and remain measured, disciplined and entirely aligned with the objective of long-term value creation. This year, we have deployed EUR 6.5 billion of excess capital, well ahead of our plan, in a way that enhances our stand-alone trajectory and grants strategic optionality. The equity consolidation of our stakes in Commerzbank and Alpha following the internalization of Life Insurance in Italy, the combination with Alpha Bank in Romania and the acquisition of Vodeno Aion delivers significant immediate value and improves our geographic and client mix.

This capital has been deployed at an approximate 20% return on investment. roughly twice the current return on our share buyback and around 2.5x the implied return of purchasing Commerzbank or Alpha shares at current market prices. We are securing structurally higher net profit through the cycle, propelling sustainable higher dividends and share buybacks with per share and return on tangible trajectory at the top of the peer group. We confirm 2027 guidance for net profit to well above EUR 11 billion. We have combined preparation with opportunity and seized the right moment to maximize shareholder value.

Distribution can reach shareholders in two ways: directly through dividends and indirectly through capital deployment that in turn enhances future earnings and dividend per share. Dividends remain sacrosanct, real cash returned directly to our shareholders, generating an attractive dividend yield. Capital deployment, putting aside business growth and M&A, can take two complementary forms, share buybacks and share buyouts. Strategic, both create value, increasing earnings and dividend per share. The difference lies in how they do it. Share buybacks reduce the denominator. Share buyouts enhance the numerator. If we compare the position before and after our EUR 6.5 billion share buyout, we have significantly increased the total value created for shareholders above and beyond what was expected and would have been possible with share buybacks.

Above and beyond the significant improvement in the underlying performance, the equity consolidation of our stakes has further strengthened our outlook for '26, '27 and beyond. Based on Commerzbank and Alpha earnings, consensus and net of hedging costs, we expect around EUR 1 billion contribution of fully distributable net profit by '27, thereby significantly improving our net profit, return on tangible equity, EPS, DPS, tangible book value per share vis-a-vis what was previously expected. Our change in distribution policy is a natural evolution in our journey. Previously, we guided on total distributions, including excess capital at equal or above 90%. From '26 onward, with excess capital now aligned to our best, strongest peers, we are guiding to ordinary distribution at 80% of net profit with excess capital return to be evaluated yearly. This change enhances value for shareholder.

The 80% ordinary payout applied to a circa 10% higher earnings and organic capital generation. Hence, it is practically equivalent to the 90% before. Any excess capital return or deployment is on top. Shareholders now gain greater clarity and predictability and greater dividend versus share buybacks with future distribution more underpinned by sustainable profitability rather than extraordinary return of excess capital through share buybacks.

Our DNA truly sets us apart. It defines who we are, how we perform and the attraction of our differentiated model. It is built on three essential elements that together make UniCredit unique in Europe. We are the pan-European leader, uniting 13 banks plus 1 leading in their markets. Institutions that in most of our markets are not only leaders but often synonymous of banking itself, and more than 20 million clients to whom we offer best-in-class solution and a single getaway to Europe.

We have harnessed this unique pan-European model, maximizing local empowerment while leveraging our combined scale in strategic partnership, in talent, in technology, in data, in AI, in product factories, in procurement, thereby making the group much more valuable than the sum of its parts. In doing so, we have achieved our ambition for UniCredit's model to become the benchmark for banking in Europe, redefining what best-in-class across profitable growth, operational and capital efficiency, distribution and strengths look like.

And we innovate, striving to anticipate market trends, continuously investing in people, in technology, data and AI, products and distribution channels, aiming to lead in the future while delivering short-term results. These three elements: pan-European leadership, benchmark for banking and innovation form our DNA. They are the foundation on which we deliver today and build for tomorrow. Together, they are what makes our outstanding performance sustainable and what provides us unmatched ability to create value to other banks that wish to join our group.

The first trend of our DNA, the one that makes us truly unique is our pan-European nature. Our strength lies in our ability to bring together more than 20 million high-quality loyal clients through our 13 plus 1 leading commercial bank with commanding market share in the most profitable and value-accretive segments in each market. We do this through a common vision and strategy, supported by shared product factories, increasingly shared technology and data platform, shared procurement and the strength of a combined balance sheet.

We have created a scale advantage for all our banks, enabling them to leverage the group. At the same time, they use our pan-European network to offer unique products and services from trade finance to cross-border flows on a level that few can match. This combination of scale, connectivity and client quality makes UniCredit the partner of choice across Europe, a competitive edge that is difficult to replicate. And that advantage translates directly into irreplicable and resilient revenues, quality NII and fees and a strong foundation for future growth.

Because of our success in truly leveraging our European network, the second interconnected strand of our DNA is that we are and strive to continue to be a benchmark for banking. Over the past few years, we have identified and executed a transformation blueprint that many thought impossible and now many are trying to replicate. We have shown that a large multi-country complex institution can be simplified, can be empowered, can be brought together and made more efficient and more profitable than others.

In the first phase of our transformation, we unified the group under one purpose, one vision and one set of values. We empowered our banks and our people, simplified our structure and strengthened our ownership. And we rebuild the trust and passion critical to making the impossible possible.

We increasingly leveraged our scale by integrating partnership, digital and data capabilities, procurement and product factories under one common model. We invested in our people, in our technology, data and AI, product factories and distribution channels, building the capabilities and infrastructure needed for long-term success. This transformation worked and is still ongoing. We delivered sector-leading efficiency, both in how we operate and reward capital while securing top-tier net revenue growth and moving our return on tangible equity from the bottom of the pack to the top. Our shareholder returns have been among the best in Europe.

Such was the success of Phase 1 that we were now able to seamlessly move to Phase 2, continuing to execute our multiyear transformation blueprint. Phase 2 further emphasizes the focus on the front line, on the top line, accelerating our profitable commercial growth in a targeted fashion while continuing to improve our operating model. We're moving forward with a clear set of initiatives, all designed to drive quality, scale and long-term value. Our focus is sharper. Our execution is faster, and our ambition is higher.

We're directing capital and resources towards the most attractive opportunities, the right geographies, the right client segment and the right product areas, ensuring every euro we invest delivers the highest possible return. We are expanding our product factories, deepening integration between them and our commercial banks and capturing more of the value chain. We are accelerating in SMEs and private and affluent, where our franchise is strongest and our potential greatest. At the same time, we are transforming how we serve clients, moving decisively towards an omnichannel model that seamlessly combine physical and digital, giving every client the best experience UniCredit can offer.

And as always, our people remain at the heart of everything we do. We continue to increase the level of empowerment of our talent, the building of new skills and the creation of an environment where innovation, ownership and collaboration drives results. Phase 2 is about turning a proven blueprint into a compounding engine of growth, maintaining the efficiency discipline and strength that defines UniCredit today.

The third strength of our DNA, the one that defines our future is innovation. We're not only building the future of UniCredit, we're helping to shape the future of banking in Europe through our 13 markets. Innovation for us is not an add-on. It is a mindset, part of how we work every day, seeking to extract value from it. We have invested in a proprietary cloud-native core banking platform through our acquisition of Vodeno, bringing together best-in-class technology and AI with scale to create a modern, agile foundation for the bank of tomorrow. We have brought in more than 200 outstanding engineers acting as an internal sandbox to support the modernization of our entire group.

We are investing in data and AI at scale, using them to transform how we serve clients, how we manage risk and how we operate, with over 140 use cases currently alive and many more in development. We continue to innovate in the way we serve clients, letting them choose among our omnichannel. As an example, Buddy, our digital branch in Italy, onboarded 300,000 new clients in the 9 months, reaching almost 800,000 clients. We're also carefully but actively shaping the future of digital assets in Europe, combining prudence and responsibility with innovation as we explore new frontiers in tokenization, payments and secure digital value. And our innovation is not limited to technology.

In an environment of accelerated change, we are innovating in how we develop and reposition our people, our talent, in how we work and lead, empowering our people, promoting collaboration across border and creating an environment where ideas thrive, and execution accelerates. Innovation is how we build the future for our clients, for our people and for our bank. And crucially, this innovation is self-financed, made possible by the efficiencies and the profitability we have already achieved.

The success of our strategy and our unique DNA are clearly reflected in today's results. We marked the 19th consecutive quarter of profitable growth, underpinning the best 9 months in our history. It is proof that UniCredit has fundamentally transformed into a stronger, more resilient bank. We have outperformed across all key metrics, demonstrating consistent execution and the power of our model.

Net revenues remain resilient, driven by better-than-expected NII net of loan loss provision. We look at it that way as NII cannot be separated from loan loss provisions. Robust fees, now including the internalization of Life Insurance in Italy, stronger contribution from investments that become a further core engine of our future net revenue growth. Trading, but while temporarily affected by negative one-offs, still shows good underlying client-driven dynamic. These results underline the quality and increasing diversification of our top line.

Operational excellence remains one of UniCredit's key differentiators. Costs fell again in the quarter and were broadly flat over the 9 months, a remarkable achievement given the integration of new perimeters and continued investment in technology, people and growth. Our cost-to-income ratio remains among the very best in Europe. Capital strength is confirmed not only as an absolute number, but also given our superior organic capital generation now in line with net profit. Net revenues on RWAs remained strong. As a result, UniCredit's profitable growth remains best-in-class.

Our top line remains resilient with each one of its driver performing better than expected. For the first 9 months, net revenue stood at EUR 18.5 billion, broadly stable despite headwind from lower rates. In the third quarter alone, net revenue reached EUR 6.1 billion, up 1.2%. NII net of LLPs declined 4% in the 9 months and 4.2% in the quarter, with cost of risk remaining benign at 10 basis points and NII -- gross NII performing better than anticipated at the beginning of the year.

Margins were stable and loans grew circa 2% versus Q3 2024 end of period, partly offsetting the rates decline. Net NPE and default rate both improved to 1.4% and 1.1%, respectively, confirming sound asset quality and coverage. We kept overlays unchanged at around EUR 1.7 billion. NII RoAC at 19.2% remains best-in-class. Fees and insurance income, which benefited from the internalization of Life Insurance and strong investment product performance, continues to grow, reaching EUR 6.6 billion for the 9 months, up 4.9% and EUR 2.1 billion in the quarter, up 7.6%.

Investment contributed EUR 693 million for the 9 months, up 84% and EUR 248 million in the quarter, up 64%, mainly from the equity consolidation of Commerzbank. While '25, the contribution of investment is offset by negative trading costs hitting the trading line. From 2026 onwards, they will significantly propel our top line. Together, all this reinforces the sustainability of our earnings mix with fees and insurance income representing a top-tier share of revenues.

Trading performance of EUR 1.3 billion for the 9 months, down 10% was negatively affected by one-offs from the mentioned equity consolidation. Trading was up 4% in the quarter. Underlying trading remains solid and client-driven. This diversified revenue base across products, geographies and client segments ensure that UniCredit remains well positioned to deliver quality growth even in a challenging environment.

Our operational efficiency continues to set the benchmark. Costs were broadly flat over the 9 months and in the quarter, fully absorbing the integration of Vodeno Aion, Life Insurance in Italy and Alpha, Romania as well as inflationary headwinds.

Our cost-to-income ratio remains among the lowest in Europe at 36.8% in the 9 months and 37.1% in the quarter. This reflects our ability to simplify, streamline and automate while supporting rather than hindering our top line growth. Our continued efficiency also allow us to invest wisely in people, in technology, in products and channel to make us ready for the future. This is a tested blueprint, streamlining where it matters, investing where it counts and delivering operational excellence while laying the foundation for long-term growth without hindering present results.

Our capital and capital efficiency remain best-in-class. Net revenue to RWA was broadly flat at 8.6% in the 9 months and 8.4% in the quarter, notwithstanding the significant impact on NII from rates. Organic capital generation continues to be a key strength. We generated EUR 7.9 billion, 283 basis points, allowing us to accrue 100% of distributable net profit as dividend and share buyback, most importantly, without denting our overall capital position.

Our CET1 ratio stands at 14.8%, down 120 basis points due to the equity consolidation of Commerzbank. The regulatory impact of 14 basis points was almost entirely offset by other drivers. On a pro forma basis, our CET1 is down to 14.6% due to the equity consolidation of the 26% of Alpha stake, partly offset by the Danish Compromise impact related to the Life Insurance internalization in Italy.

We continue to deliver quality profitable growth, underpinned by strong operating performance, complemented by one-offs with net revenue, cost and capital all better than our expectations. We are not just growing, we are growing with discipline. Our model continues to prove its strength, delivering growth, profitability, efficiency and capital strength and outsized distributions all at once.

Italy continues to be our quality earnings powerhouse, accounting for 44% of group net profit. Net revenues are down 1.7%, to EUR 8.1 billion. NII, net of LLPs declined 5.1%, primarily reflecting rate normalization, only partially mitigated by disciplined pass-through management and benign cost of risk at 22 basis points.

Asset quality remains robust with stable coverage and decreasing default rate. Gross and net NPE ratios were broadly stable at 2.7% and 1.5%, respectively. Adjusting for state guarantees and considering Italian overlays, the net NPE ratio of Italy drops to 0%. NII RoAC remained strong at 23.2%, thanks to our focus on margin over volume and targeted origination.

Fees and insurance income grew 4.7%, reaching a top-tier 42% of revenues, driven by investment products up 7%, the contribution of Life Insurance internalization and benefiting from one-off incentive scheme effect on payments. Costs were down 1.7%, to EUR 2.9 billion in Italy, bringing our cost/income ratio to 34.1%, the best in the country. Net revenue on RWAs remained broadly flat at 10.4%, also the best in Italy.

Profit before tax, excluding one-off, rose 2.4%, to EUR 5.1 billion with RoAC stable at above 32%, reinforcing our market leadership. Italy exemplifies our strategy in action, focusing on quality, efficiency and disciplined growth. Its performance underlines the strength of our model and its ability to deliver across cycles.

Germany continues to be a resilient anchor, accounting for 22% of group net profit. Net revenues are up 2.4%, to EUR 4 billion. NII net of LLPs grew 1% thanks to disciplined pass-through, the anticipated effect of trading normalization and a decline in cost of risk at 14 basis points. Asset quality remains solid with overlays broadly intact. Net NPE ratio is down to 1.4% with stable coverage and default rate decreased. We keep strong attention to single file given the corporate nature of our bank.

NII RoAC remained strong at 21%, reflecting our focus on margin over volume and selective origination. Fees and insurance income grew 0.9%, reaching 31% of revenue, driven by investment products up 11%, partly offset by weaker financing activity. Costs were down 2.8%, bringing our cost/income ratio to 37.6%, the best in Germany. Net revenue on RWAs at 8% confirm strong capital efficiency.

Profit before tax at EUR 2.4 billion, is up 7.2% with RoAC at 23.4%, reinforcing our market leadership. Germany is a clear example of our ability to consistently deliver through disciplined execution. Its performance highlights the strength of our diversified model with resilience, efficiency and capital discipline driving record profitability and reinforcing our quality leadership in the market.

Austria continues to be a resilient anchor, accounting for 12% of group net profit. Net revenues are down 1.4%, to EUR 2 billion. NII net of LLPs declined 5.7%, only partially mitigated by loan growth at 1.3% at stable margin. Asset quality remains solid, with overlays intact. Net NPE ratio is down to 2%, with stable coverage and default rate further decreased. NII ROC at 14% confirms disciplined origination. Fees and insurance income grew 5.2%, 8.2%, excluding Card Complete disposal, reaching 31% of revenue, supported by advisory and financing and strong investment products up 10%. Costs were broadly flat, bringing our cost/income ratio to 38.9%. Net revenue on RWAs at 6.7% confirms strong capital efficiency.

Profit before tax at EUR 1.2 billion, down 3.8%, broadly flat, excluding the new bank levy. With RoAC at 22.8%, reinforcing our profitability leadership in Austria. Austria showcases the power of our focused strategy. Combining profitability, efficiency and prudent risk management, its performance confirms our ability to lead in corporate lending while maintaining exceptional asset quality and strong return.

Central and Eastern Europe continues to be our growth engine, accounting for 22% of group net profit. Its role as a key profitable growth driver will fully emerge once its cost of risk fully normalizes. Net revenues are up 1.7%, to EUR 3.5 billion. NII net of LLPs declined 4%. The strong loan growth of 13.5%, including the contribution from Alpha, Romania, 8.5% without, was able to only partially mitigate the expected rates decline. And Central and Eastern Europe cost of risk increase at 5 basis points from minus 25 basis points as it gradually normalizes.

Asset quality remains solid with net NPE ratio stable at 0.9%, growing coverage ratio at above 64% and default rates stable. NII RoAC remained strong at 24%, confirming disciplined margin management. Fees and insurance income grew 13.3%, reaching around 29% of revenues, supported by broad-based contribution across countries with particularly strong performance in advisory and investment products, up 24%. Cost increased 12.4%, 2.7% on a constant perimeter, so excluding Alpha, Romania, bringing our cost/income ratio to 33.8%. Net revenue on RWAs at 8.5% confirms strong capital efficiency.

Profit before tax at EUR 2.1 billion, down 1.8% with RoAC at almost 30%. CEE continues to demonstrate the success of our growth strategy with broad-based momentum across countries and products. Its performance underlines our ability to scale profitably, diversify earnings and deliver sustainable value across the region.

Our Russian bank is now a highly focused franchise. Local loans and deposit account both less than 0.5% of groups. Cross-border payments focused on now euro and U.S. dollar account for less than 2% of group. No cross-border lending exposure remains, and a positive liquidity contribution from Russia to the rest of the group still exists. We have achieved this significant reduction at minimal cost, both in the interest of our shareholders and in adherence to the spirit and law of sanctions.

Our Russian bank is ring-fenced and operates strictly within all legal and regulatory requirements. This franchise is managed in a controlled and disciplined way, ensuring stability and compliance while minimizing risk. The exposure on CET1 from extreme loss scenario has declined from circa 130 basis points to circa 80 basis points, mainly connected to retained earnings.

Client solution remains a cornerstone of leveraging group scale. Product factories that support our banks and our partners in delivering capital-light fee-driven growth while also accelerating their NII from specialty areas. Net revenues reached EUR 9 billion, up 7% and fees EUR 6 billion, up 4%, confirming the strength and diversification of our product portfolio.

Investment products delivered record performance with fees up 9%, to EUR 1.9 billion and AUM and AUA up 14%, to EUR 186 billion. Our Onemarkets Funds reached EUR 28 billion, up 68% year-over-year, supporting the internalization of almost 80% of our value chain still going.

Insurance has become a major growth pillar, with fees and insurance result up 12% to EUR 700 million. Following the internalization of Life Insurance, we are now the fourth largest player in Italy, with EUR 46 billion in reserves. Payment fees were up 2%, also benefiting from timing of yearly incentive paid in Q3. In a segment affected by headwind such as new regulation on instant payment, this is a great result.

We are top 3 in 4 European markets in issuing and acquiring, and we're awarded Best Cash Management Bank in 7 countries by Euromoney. Advisory and financing maintains a top 3 position in bonds and loans by fees in Italy and in Germany. Client risk management was up 13% and reached a return on allocated capital of 43%, driven by high-quality client-centric activities. Trade and correspondent banking remains a leader with top 3 position in every country in which we operate and a cross-border market share 5x higher than any domestic one. These factories are client-centric and scalable, a key driver of our Unlocking Acceleration strategy, enabling us to retain more of the value chain.

In conclusion, we have delivered another record quarter, completing the best 9 months in UniCredit history. This marks our 19th consecutive quarter of quality profitable growth and a clear beat across all our KPIs. Our strategy is working. We're leveraging our unique DNA as a pan-European leader, serving a high-quality client base through 13 leading banks and partner, demonstrating the validity and the strength of our unique model as we also stand as a benchmark for banking.

We're sustainably accelerating growth, well ahead to what we expected at the beginning of the year, relentlessly executing while continuing to invest and innovate for the future. We have reinforced our double-digit growth trajectory in EPS, in DPS, in tangible book per share, maintaining a return on tangible equity greater than 20%. This places us in a leading position now and in the future.

We have reinforced our expected distribution with higher dividend and ordinary share buybacks, placing us again at the top of the peer group for the 2025, 2027 period and beyond. UniCredit continues to create superior value for all stakeholders, delivering this quarter a great performance with great prospects and great present and future shareholders' returns and is today stronger, more resilient and better positioned than ever.

Thank you, and we will now open to questions.

[Operator Instructions] The first question is from Ignacio Ulargui, BNP Paribas Exane.

I have two questions. I mean the first one is focusing on loan growth and the kind of expectation of acceleration of growth that you see. I wanted to get a bit of a sense of how that trend is going in Germany and Italy, particularly.

Second question is on the potential measures that you might take for improving the P&L in '26 and '27. If you could give us a bit of a sense of the magnitude of it and the focus because if I understood correctly, Andrea, you said during the call that it may not be that focused on cost, more on investments. So I just wanted to get a bit of color about that.

And if I can -- may, a final clarification on the distribution and share buyback. If I just look to consensus, consensus has around EUR 13 billion of share buyback currently. And if I just look to your numbers, you get EUR 11.5 billion. I mean, could that be bridged through extraordinary distributions?

Okay. Let me start on loan growth. So as we said probably conservatively from the very beginning, to see significant loan growth at stable or improving margins, you need to see economic development, investment and actual people wanting loans. If you push loan growth against the wall, you're going to reduce your margins. And as we said many times, margins trump volume 3:1. So it may look quite good on the top line. But honestly, over time, you're denting profitability and it's difficult to recover.

So with that caveat and applying that discipline to how we grow, we're seeing significant progress in loan growth in Italy, and we believe that such progress is going to accelerate markedly in 2026 and beyond. Why that? For mainly two reasons. The main reason is that like the rest of the group, we have almost completed all the actions to bring our loan portfolio to the profitability it has today with a very marginal amount of loans still below EVA. Why is that important? Because in order to do that, we delivered what we delivered in the past, but we had a drag as we purged off positions that were not meeting our benchmark. We don't -- we no longer have to do that. So look at what that means now.

Secondly, post the withdrawal of our offer of BPM, we have gone back to the drawing board, and we resumed the plan we were about to launch last year within the acceleration phase that we put on hold because of the acquisition -- or possible acquisition. That plan has been boosted. And we actually believe and -- watch this space that we will be profitably gaining market share next year in the country, and that will drive a significant portion of Italy's results.

So on Germany, I would just say the usual same thing but different. Again, we have a bank that is focused. Obviously, there was no M&A situation there, and that is now well set after all the changes we've done in the business, in the operating machine and in other places to grow profitably. We still see some headwinds from some competitors, if I may, dumping on -- to achieve volume. We will not be drawn in that, but we believe that we can grow even without that, and we will demonstrate that, that is possible. So I am positive on that as well -- and I am positive that in the target segment of Mittelstand, affluent and private, we will be gaining growth or market share.

In terms of potential measures to improve. First of all, why do we have these potential measures? We have potential measures because once we announced our Phase 2 of UniCredit Unlocked Acceleration, we -- there were a few things that were different. Number one, our view on macro was more negative than it is now, having -- not on macro itself, but how we navigate the macro. Number two, we did not have the extra boost that we believe we're going to have primarily in Italy, but also in the rest of the group. And number three, and most important of all, we had not witnessed what this franchise can do. And if you go back to my comments, we were ahead of expectation in our acceleration in Q1. I repeated the same in Q2. I'm repeating the same in Q3. That gives me a lot of confidence that our acceleration can go further.

As we go further in our acceleration, like in any acceleration, our businesses in the process of preparing the new multiyear plan, which is not approved yet, so I'm not anticipating anything, are requesting further investment in order to underpin that acceleration. There are only so much you can do with gains in efficiency, which, by the way, we will continue to make. But to harness the acceleration we want, we need positive investment.

How does it change? It changed that if you look at the past, most of our investment were targeted to efficiency. And we let the network, the client franchise run, and they did an excellent job. The action we are now considering for the rolling of a new MYP are much more targeted than before on top line acceleration. It means you're going to look at hiring. Italy will hire in spades. Training, Italy will train in spades, so will Germany and the other countries.

Digitalization of our omnichannel to make sure clients feel a seamless experience if they go to the branch, to mobile-first, Internet, Buddy Bank, and I can continue, rather than pigeonholing them into a segment, we think that, that is the future. But that requires continued investment. As you know, we've invested about EUR 1 billion group-wide in modernizing our physical presence. We've invested another bunch in mobile-first, in technology, et cetera, for our network. We will accelerate that. And there are also some other levers that we can pull to further insulate group results from either adverse effect or accelerate them, and that, we are considering now.

So with the MYP of at that point, '26, '28, we will be reviewing and hopefully upgrading our ambition. And in order to support that greater ambition, we will take on a year that honestly has some one-off in it, some of that sunshine to further propel our future. And we don't have an amount yet. We are taking from -- bottom-up from every business and area what they would wish and the commitment that they're making. It's still premature to discuss it, but it was correct to raise that possibility because now it is a possibility.

On distributions, I would like to make the following comments because maybe I look at them in a different way than everybody looks at them. There is only one distribution that ends up in the pocket of our shareholders. That is called dividend. It's a cash payment that hits your account. When I do share buybacks, by reducing the share count on the same earnings, we are obviously accelerating the EPS and accelerating the DPS, again, dividend, and accelerating my tangible book per share. But it's an indirect effect on what gets in the pocket of my shareholder.

When we have decided to take the moment and invest EUR 6.5 billion today in the stake consolidation, we have done a few things that I think were not considered enough. Number one, our shareholders had a lot of uncertainty as to the timing of deploying of our excess capital, between now and the end of '27. Well, it could mean tomorrow, and it could mean December 31, 2027. Now EUR 6.5 billion are deployed, and that's it. They are going to start pumping from '26 onwards.

Second topic, when you do share buybacks, as you know very well, you cannot anticipate at which price you're doing the share buybacks. So as of today, it's 11% return on investment. Over time, nobody has any idea. It depends on where the share price is when we will execute it. However, by deploying EUR 6.5 billion of our excess capital at a 20% return on investment, we give exact clarity on what the impact will be, and there is no going around it. Incidentally, that 20% is almost double what we would have gotten by doing the same amount of share buyback on our own shares, and it's 2.5x higher than what anyone who wanted to replicate what we have just done would extract from consolidating the same amount of shares in Commerzbank and Alpha.

So we view the second leg called capital deployment as deployment, and I can deploy it in share buybacks, I can deploy it organically in the business. I can deploy it in M&A, or I can deploy it -- obviously, this is not recurrent, and we had an opportunity that we grabbed into strategic stakes that also give me strategic optionality that no other bank in Europe has.

When I put it all together, what are the facts? The facts are that versus consensus of what we would have paid in dividend to our shareholders before we deployed in the '25, '28 -- [ FY '27 ] period, we are going to pay EUR 1 billion more. And our dividend per share has increased its growth dramatically versus before. So from a dividend standpoint, our shareholders are massively better.

If I look at share buybacks, you are correct. They are going to be lower than what they were before, or at least consensus is saying that. And they're saying that because EUR 11.5 billion that consensus is giving plus EUR 6.5 billion is almost EUR 19 billion, not EUR 13 billion. So in effect, what we're saying is that we've generated so much capital that we could distribute or employ 6.5% at great returns and still give you close to the same amount of share buybacks you were going to have before. If you add the dividend amount and the share buyback amount, the before and after is very similar. But now we have EUR 1 billion more revenues and EUR 1 billion more net profit because of our investment.

To finalize my answer to your question, could there be extraordinary distribution? Absolutely. We had a 16% plus CET1 before. We were on another galaxy to all the other banks. Incidentally, many believed that all that excess capital could not be returned this fast, hence, the consensus. Now we are -- let's take it to the end of the year, somewhere between 14.5% area or slightly lower depending on a number of actions. We are still very high, but at the level of best-in-class competitors. So we're no longer an outlier. But we are at these levels.

Our target CET1 is not 14% plus. It is 12.5% to 13%. So depending on how the business performed, how we see the deployment of further opportunity into our organic growth, which in turn will drive dividend and earnings. In terms of all of that, we will continue to trend down to 12.5%, 13%, and you can do your calculation on what excess capital is that. And if we don't find ways to deploy it profitably in our organic growth, it will come back to you. It's just that we will tell you how much it is at the end of every year when we take align on how well we have done and what our future prospects are.

Last thing I would say is that if you look at the practice we had when we launched UniCredit Unlocked, it's identical. We said vis-a-vis dividend, they are sacrosanct, and we will tell you how much of the excess capital we give you back at the end of every year. We changed. Sometimes you need to go back to where you were because it was better, and I think it is better.

The next question is from Antonio Reale, Bank of America.

Antonio Reale from Bank of America. Two questions for me, please. The first one is on NII in Italy. We've seen a lag down this quarter, given the outlook on rates. My question is, do you think -- we've seen the trough in your Italian NII this quarter. I've seen a good uptick in deposits, and you've talked about growth. So do you think that NII in Italy can be the sort of swing factor for the group given the performance we're seeing elsewhere? That's my first question.

My second question is a follow-up on your profit ambition for '27. You're targeting well above EUR 11 billion. If I look at your Slide 2, you're looking to add EUR 1 billion by 2027 from strategic investments, which at least on my numbers, seems somewhat conservative. If I add that up to your underlying profits this year plus some of the growth you talked about, you're really going to be closer to EUR 12 billion, more than EUR 11 billion. Is it -- I mean, what am I missing? Is it -- you're building buffers and buffers?

Or the third and last clarification, if I may. I think you've talked about new multiyear plan. Did I understand correctly that you're looking to present a new strategy update sometime next year? If so, could we have any visibility as to when you would expect that to be?

Okay. So let me start with NII. Let me be broader. I don't think NII in Italy has troughed yet. I think it has a little bit more to go. But I would say that if I take a group-wide view in our Executive Committee, the word troughing on NII is more and more used. So I think that like with the plan, the right time to discuss about trough or no trough and what are the expectation is probably with the year-end results as we will be sitting on the year-end result, see what would have happened around January and the prospects, and we will be able to guide you without speculating.

But I would say that we are troughing in the group. We just need confirmation that this is sustainable.

With respect to net profit ambition, I think I would like, Antonio, not to make the same mistake as we -- probably I made on distributions before. We will return EUR 30 billion -- or more than EUR 30 billion. We spent EUR 6.5 billion, and it becomes EUR 36.5 billion. Now it just became EUR 33.5 billion, but not EUR 36.5 billion, and everybody is disappointed. So I would say the following: Because of the further acceleration that we see in our underlying business, which is really the exciting story in our results of this year. Unfortunately, because of all the noise, the consolidation of stake, the [ visa and the VAT ], it is kind of hidden. But because of the acceleration of our commercial results that we see this year and that we confirm 3 quarters in a row.

And I hope, and it's critical, we will be confirming in the fourth quarter, we are more optimistic than what we were when we designed our Phase 2 of accelerate of UniCredit Unlocked '25, '27. So as every year, we update that by losing the -- looking back and adding a year. I think at the moment, if the trends are confirmed, we will be looking to upgrade our expectation for profitability. At the moment, you only have '27. You will look at '27. We will add '28, and we will clarify '26. For that reason, we are making the investment.

In terms of your reconstruction, I would say this, we were going to make circa, and you know that circa can be up or can be down, EUR 10 billion in 2027 before we made these investments -- or before we consolidated this investment. So if you mechanically take EUR 10 billion, and you add EUR 1 billion net from this investment, and -- you're right, the EUR 1 billion is dependent on two factors: the consensus on Commerzbank and Alpha being right, and that I'm not going to get into. And secondly, our hedging cost, which I'm deducting from the total numbers being the ones that you're estimating to be, but we are going to give you an update with the year-end numbers.

So if you mechanically add circa EUR 10 billion to circa EUR 11 billion, you don't get to well above EUR 11 billion. You get to circa EUR 11 billion, okay? Why are we telling you well above EUR 11 billion? Because the underlying franchise is doing better than we anticipated at the beginning of the year. How much well above EUR 11 billion, I'm not going to comment because we're finalizing our plan. We're getting the feedback from everybody. We want to be realistic on what we say. And most importantly, our Board needs to approve it. But let's put it this way, I'm optimistic about 2027, which is the only number out there.

For us internally, we are also positive on what we can do on '26 because of all these factors. Because it's not only 1 year that gets pulled up, '26 and '28 will be affected as well. But with one caveat or one caution. The caution is that the new investment that we're doing on accelerating are going to impact '26, but not fully. They need to be rolled in. The years where our investment -- new investment are going to impact the most, and I'm answering your question again, is in '27 and '28. In '26, although we have started this investment, they will impact for only a fragment of the year. So '26 is going to remain just what -- which is not little, what our acceleration can deliver without a lot of impact from those investments because they will arrive a little bit later in the time and affect more the second half of the year than the first half of the year. I hope that, that's clear.

With respect to the strategy update, et cetera. Unless somebody demonstrates otherwise, I personally do not like Investor Days, okay? I like updating everybody, all of our stakeholders every quarter. I don't think many banks maybe bore you or interest you with an update on their strategy and where they are going as integral part of their result presentation 4 quarters a year. And then once a year, once we roll our plan, we review our guidance with a lot more granular detail. I think that is more continuous and better.

So should you expect that with the full year 2025 results, we will give you significant detail on the next 3-year plans as we roll? You should. Is that an Investor Day? No, it's not. And so the date is very clear, is when, Magda will tell you, we will have the year-end results sometimes in February.

The next question is from Delphine Lee, JPMorgan. Ms. Lee, we cannot hear you. Maybe your line is mute.

Yes, apologies. My first one is on Commerzbank. Just to understand a little bit where we are now on the derivatives that are still in place on the hedging costs. Just to understand a little bit how to read a little bit the effect you've taken this year, but also kind of what we should expect in coming years.

And my second question is on the Italian bank tax. I mean, I thought you said it was a bit early, but I don't know if you could just share any color about just what you think is a likely scenario?

Okay. So Commerzbank, where we are now on hedging cost? So I would say that it's fair to say that we're now completely aligned on the upside with Commerzbank as we have, I would say, significant cost this year. That's why you see the impact I was talking about, practically eliminated all call options that we had sold on the stock when we colored it -- or on part of the stock when we colored it. So if you look at it from a long standpoint, on the upside, we're 1:1.

However, as for everything else we do, and it's not personal or anything, we remain always caution as we have overlays on our asset quality, while we are very strong on it and we are very optimistic on it, we have something called put option on the stake just in case. So if the performance is positive and ahead of expectation, we are 1:1 aligned, if the performance is not just negative, but significantly negative, we make money, okay? So that's where we are.

Now those hedges cost money, and they are netted from the profitability of the stake. They cost money in two ways. One, the cost of stakes, which is several hundred million. We will update on exactly where we are because we're doing -- we continue to do action to reduce it, with the end of year results. And the second thing is funding. Because we are funding the participation, obviously.

That is -- the two of them are significant. But as we have taken cost upfront already, we continue to look at ways to reduce that combined cost to give you more and more -- a clean impact on the net income we bring in from these stakes because we think it's cleaner and clearer for all of you. We will do that. But as we are conservative, we will maintain our put option to protect on the downside. And for one rating agencies approve of that.

Italian bank tax and what do you think is a likely scenario? I think I never know what the likely scenario is with anything that is politically related, and I don't try to speculate. So I don't know. I would just say that it is premature to assess the full impact. I would say that depending on the rumor, the full impact is more or less high.

I would say that for UniCredit specifically, the combination of the fact that we are in inverted commas only 40% in Italy and 40% profitability in Italy and so on and so forth, the impact is obviously diluted on the 100%. And secondly, that by having all of the cautionary, call them, buffers that we have across, we are going to try to neutralize as much of the impact, whatever the impact is, as we can. At the moment, we expect an impact, obviously, but it's premature to tell you how much. We will see in the next few days or weeks where we're going to land.

The next question is from Giovanni Razzoli, Deutsche Bank.

Two questions at my end. One is on Russia. You confirmed that you are going to exit the country by first half 2026. Shall we assume that the contribution to the bottom line will also be basically go to zero? Or do you have ways to move some of the revenue or businesses elsewhere to keep the contribution of -- that contribution to some extent at some point?

And the second question is on your stake in Assicurazioni Generali. In the last conference call, you anticipated that you would have reduced your stake below 2%. Based on the last report on [ cons ], you are still above the 5%. I was wondering how shall we treat it in terms of contribution to your P&L or whether you have changed your views on this stake?

So on Russia, we never said we would exit by first half of '26. So let me be clear. What we expect to close -- and if you want to call it, is exit, and maybe that's where the misunderstanding lies, is that we will close our retail operation, which has already declined very significantly by the first half of '26. And we stand by that at the moment.

The state of the franchise going forward is, as I said, we have about EUR 700 million in local lending, [ was ] EUR 700 million, we haven't granted any new loan since the war started. But the rate of decline of those loans is dependent on which loan they are. So if I have a mortgage, it's a long tail. That's why banks are different than our industry. If they are multiyear, they are multiyear. But we believe that we will gradually trend line to about EUR 500 million over time. But there is very little we can do to go above and beyond that because if we have a loan outstanding and we are not giving you one, you trend line as the loans decay, and that is what varies.

On -- as we said, on deposit, the local deposits are just below EUR 1 billion. We are a very cash-rich bank. We are viewed to be a safe haven to a certain extent, one because we are international and two, because of our strong capitalization. And obviously, by not having done any new loan, we are not exposed to any worsening of a credit cycle of anything else. We're just, I don't know, call it a safe deposit box, maybe it's not the right word. So those are there. Under Russian law, we cannot turn away deposits. So they are what they are. We don't see any particular trend up or down at the moment, but they are what they are, and they are probably going to stay around that level.

On payments, we used to be multicurrency, if I remember correctly, on 16 different currencies. We are now focused on 2. Some we have discontinued, some we have effectively rendered marginal or close to 0. Those 2 are U.S. dollar and euro. As you have heard very broadly in Italy and it said, we are providing a service to international Western company that are still in the country and to the Western world that requires to execute payments directly and not through other economic blocks for energy and commodities that are continued to be purchased by all of our countries from Russia. And therefore, that's what they are there for, and they stay there. They are less than 2% of the total payment that we do, about EUR 6 billion, EUR 7 billion. We don't see very material change from that, but they could evaluate.

So then you asked your question about the contribution. I think because of how Russia and Russia rates are and because we are super covered in Russia, super covered in Russia, every time a loan is repaid, we get significant write-backs. So as an example, this quarter, one large multinational in -- or one large company in Russia repaid a cross-border loan, the last cross-border loan of substance that we had. And as they repaid, they were covered at 40%. We released a significant amount of provision.

From the beginning of the war, we've had that trend again and again and again and again. I can't stop that. If they repay, and they pay in full, I'm booking the release of provisions. And so I do think that the Russia trend line will continue as is, will continue. The Russia contribution to our profitability will significantly decline in '26. And in '27, as we said, that the contribution was going to trend down to, let's call it, marginal.

And when you look at our numbers -- and I have made this point before, but maybe it's missed. Try to look at our numbers, and after '27, eliminate the fact that we are absorbing a EUR 600 million to EUR 700 million compression of bottom line and much greater on NII from the compression of Russia because at that point, my delta -- I will have troughed, and my delta goes up. What we are telling you is that the performance, the commercial performance of the rest of our franchise is running a lot faster than you think it's running because it's also absorbing that.

Stake in Generali reducing, et cetera, et cetera. So our net exposure to Generali has been reduced -- or our net stake in Generali has been reduced significantly -- dramatically. I would say, below 5%. I wouldn't say it is below 5%. And furthermore, what remains is hedged on the downside. Why has it been done in a way? We have done it because we didn't want to weigh on the company, and that's what we have done.

Is it strategic? No, it's not. Have we changed stance? For the time being, we have not changed stance. We are where we are. We have reduced the exposure. It is not something that is considered tactically important at the moment. We have reduced our net exposure and potentially, we will reduce more. But at the moment, you should think that between the net number and the hedge that we are, it's well below 2%. The net exposure, I want to be very clear.

The next question is from Britta Schmidt, Autonomous Research.

A follow-up on Commerzbank. The pro forma CET1 guidance of 14.6% does not mention the increase in the stake to 29%, but the net profit indications for 2027 still do. Is this just a matter of timing? And what would be the impact of an additional 3%?

And then with regards to NII, you said that it will pick up once we've fully priced, and you sound more optimistic on loan growth in Italy. Can you confirm the 2027 NII indication that you previously provided to be slightly above 2024?

So the -- yes, we are talking about 2027, and it is expected that by that time, in my opinion, much earlier than that, the remaining physical portion of the stake between 26% and circa 29% will be, let's say, consolidated. At the moment, we don't need it. It has an impact on capital. We don't need the contribution. And for the time being, it is better to do that because it squares with a long position with some of a short position, and it reduces the volatility of our P&L, which at the end of the day is what all of you want.

So I would say if you fast forward to '27, but probably much earlier, we will be at circa 29% plus/minus. But the timing to do that is linked to minimizing the impact on capital and ensuring that the volatility and the impact on our P&L quarter after quarter is -- still gets reduced over time, so you don't need to go and estimate that, et cetera, et cetera. So that is the point.

With respect to the NII indication, I think for the time being, we are just confirming. As we review our rolling 3-year plan, we will update you on that. And depending on how much more growth we see vis-a-vis the time where we had that, we may be updating it on the upside.

The next question is from Sofie Peterzens, Goldman Sachs.

This is Sofie Caroline from Goldman Sachs. So my first question would be, you have the 29% stake in Commerzbank and 26% in Alpha. In 5 years' time, how should we think about the probability of UniCredit owning 100%, potentially having unchanged ownership or not owning anything in these two banks. So if you could comment on how we should think about the ownership?

And then my second question would be around the costs. I know you will have the strategic update with the fourth quarter results next year. But kind of how should we think about kind of cost growth in '26? Should we expect any restructuring costs? And then kind of very long term, do you think that there is potential for UniCredit and European banks to become much more efficient than what we are today? You have one of the best cost/income ratios in the sector at 37% in the first 9 months. But could that potentially go down to 30% or even lower in the very long term?

Okay. So I think for the time being, we are quite committed to remaining at a level of participation that is below the level of a full offer for very different reasons in Alpha and in Commerzbank.

With respect to Alpha, one of the reasons why -- or the main reason why we have increased our stakes, 9.9%, then we went to 20%, then we went to 26%, is very simple. We have an outstanding relationship with the bank, number one, and the bank asked us and considered it a positive development for them. That is a good reason when you have a partner.

The second good reason, because you always need to have the financial meeting, is Alpha has effectively allowed us to demonstrate to ourselves first and then to the market that the setup that UniCredit now has with centralized product factories, with centralized procurement, with increasingly aligned technology, data platform with let's call it, put at the center all the scalable services that a group like ours can give to 13 disparate banks, allowing those disparate banks to be not only the best they can be in the market, but surpass their competitors by leveraging what UniCredit putting at scale at the center can offer them.

We discussed it many times. There were country in the Central and Eastern Europe who could not distribute investment products because the large asset managers would not go there and support that growth. They were not relevant enough. Through us, they can. If they did that one by one, they couldn't. So we have demonstrated not only that, but we have demonstrated with Alpha that in a bank that is absolutely not part of the group, the level of value we can generate for them and for us by leveraging those common platform products, et cetera, at scale is much greater than it was. If you wish, it demonstrates that even without banking union for a group like us, we can demonstrate significantly above EUR 0 value creation across border just because we are set up, how we are set up.

We also work with them. They provide ideas, and we are providing ideas. And we believe that we have a blueprint in the way we run our network in retail, a blueprint on our contact centers, a blueprint in our digital first and vice versa, where we can extract a lot of efficiencies even if we're separate. So if you believe that, you want to increase your participation to not only benefit from that through your part of the equation but to gain more exposure through their part of the equation. And that's why we are where we are.

We will not do things in Alpha that are not in the interest of everybody, and we are very, very committed to the partnership. And we believe that Greece and Alpha are great additions, although on a partnership basis to what the group is.

Commerzbank is different, and I'm not going to comment on all the differences. But again, we are committed to stay below the full bid percentage for the moment. We have through the put options, protection on the downside, we are now aligned 1:1 if there are positive development. The two of them together give not only EUR 1 billion of net profit, but also -- EUR 1 billion of revenues, but also EUR 1 billion of net profit, which is fully distributable to our shareholders.

Today, if I were to take that off and replace it by share buyback, I would have significant dilution. So it is an engine, a further engine to propel my net revenue. It is a further engine to support distribution and net profit growth. And for the time being, we're very happy to stay where we are, and I would think about now keeping that for the foreseeable future. But obviously, we observe the situation, and we will judge what to do if and when the situation changes. For the time being, it's not changing.

How should we think about cost growth in '26 and restructuring costs, et cetera, et cetera? Okay. So I think this is a good question because it allows us to touch on a point. From 2021, we have been pounding the table that cost growth -- absolute cost growth above and beyond cost/income ratio is critical to the success of the bank. And a lot of people were saying, but why do you focus so much on cost growth with rates and this and this and that? What do you care? It's EUR 100 million here and there. I would say to those people go now tell me the same thing with rates going down.

Why is cost growth such a critical point for our group? Our competition is no longer just legacy bank. Our competition is fintechs. You just need to see how much new clients some of our competitors, the names that come to your mind are aggregating in every country. The only way we're going to be successful in pushing them off is twofold. One, improving our client experience. Hence, all the investment we're doing in the network, in the omnichannel, et cetera, et cetera. And two, having a breakeven point that is substantially below them because it allows us to have flexibility and to be able to release some of that ability on the margin if we want to push back if the situation becomes necessary.

The second reason is, as I touched on, if you are very efficient and you constantly find new ways to reduce your cost, you will be able to finance investment. Whatever anybody tells us, if you go to the market with results every quarter, if your costs are a problem, you're not investing because it would become a compounded problem. And therefore, as you don't have control on cost to contain that appearance of no control of cost, you're investing less.

In our case, we can invest more because we have control on cost. So I don't have a number to give you for full year '26, '27 or '28. But we did we did commit, we did we did commit to keep our cost broadly flat from '24 to '27 before, and there is no way I'm going to back down from that commitment. This year, the costs are broadly flat -- are going to go close to being broadly flat, not only as they appear, but absorbing all the new perimeter of consolidation that, if I don't remember wrongly, was adding about EUR 100 million of cost to ours.

So when we tell you we're broadly flat, it means we absorbed EUR 100 million investing. I don't think any bank is able to do that today. And we are determined to continue to go because we find inefficiency every day.

Restructuring cost. I have already said that on the EUR 10.5 billion of this year, which may or may not be greater, we will potentially, probably, possibly, it's a decision for my Board, deduct some upfronting of cost in investment or some below-the-line things to further accelerate not so much '26, but '27 and '28, okay? In our plan this year, when we started 2025, we did not have any such cost because we took them before. And indeed, the impact of these things are not having an impact on '26. They're having an impact on '27 and '28.

Why then have we changed our position? We have changed our position for two reasons. One, we can afford it. It's the famous quote from a famous American President, "You build your roof while the sun is shining." We have the roof. I think at the moment, we're just making improvement to the entire house. The second thing is because due to witnessing true acceleration of top line from all of our businesses and all of our countries, we feel more confident that we can spend on certain things and accelerate that growth further. So those costs or investment or restructuring, call it, whatever you want to call it, are directed at showing you that we are upgrading certain numbers because they're going to track, and they're going to give more impact.

So as of now, I can't tell you what we will do in 2026. But what I can tell you is we don't need to do anything in '26, and we don't need to do anything in '27. So if we will do something in '26 in addition to '25 or in '27, it will be because the sun is shining, we're doing much better than we anticipated, and we see better opportunities to further accelerate going forward. Otherwise, we're very happy and we're set for probably up to '28. So you have a baseline. If we can beat that baseline investing more, then we can talk about it again. But once we give you the baseline in -- at the beginning of '26, we will halt, and we will only talk about doing anything else if we beat it.

Is there a potential for UniCredit and EU banks to become more efficient than today? My personal view, absolutely, absolutely. Every time we go to the end of the year, we say, "Don't look at incremental, put everything back on a blank piece of paper and ask yourself, if you were building the business from the ground up today, would you build it like that?" And the answer is always no. "We would never do this. We would never do that. We would never do that." So in many cases, you can't change everything at the same time because we're flying while we're doing this.

But every time that we do an inch forward, we find a lot of more opportunity to do another inch and then another inch. I think for too long, our sector have said, "Oh, we cannot be more efficient than that," et cetera, et cetera. I will ask everybody how many of all of us would have thought that European banks could be not only at now much below 40%, but even significantly below 50% cost/income ratio 5 years ago. You can say it's rates. I can respond really because rates have just gone down 150 basis points, and we're still holding. It's exactly the same on return on tangible equity. "Oh, it's rates." Well, really, we're still holding at 20%, and we are committed to hold or improve both on cost -- on cost/income ratio and on return on tangible while growing. And we will demonstrate that in the next few years.

The next question is from Andrea Filtri, Mediobanca.

I think you just inspired my first question, which is when do you think you can scale Vodeno's platform up to roll it out to the rest of the group? And where do you see cost income trending to once the new tech is rolled out?

The second question is what would banks need from the European Commission to move ahead with real mergers in Europe?

And third, just a clarification, how much longer can you keep your overlays unchanged?

Okay. So I'm going to start from number 3 because it's an important question. My overlays -- this is a debate I have with many people. My overlays will remain where they are until I am absolutely convinced that I mean, summer and the sun is shining for the next 2 or 3 years. Until then, I am not going to let go. There is no point in shaving my cost of risk to look good in the short term. And then we get some issues with macro development, some issue with credit development, some issues with something and say, "Oh, and now my cost of risk needs to quadruple," okay? And by the way, I didn't say it quadrupled. I'm just giving an example.

So the overlays are what they are. I think one country where I spent a lot of time in the past, called Spain, used to call them anti-cyclical provision. For me, it's an anti-cyclical provision. When the sun shine, you create overlays and extra provision. When it rains, you release overlays and extra provision to buffer the peaks and trough of our sector. I think that is the conservative way of looking at it.

So we haven't released them yet because if you ask anybody, has there anybody who will tell you we're fine. The cycle of risk is fine, and there are no issue. And for the next 3 to 5 years, it's all fine. Nobody is saying that. So why should I release? Because, accounting-wise, we release when some of the overlays are driven by drivers. The drivers are linked to areas of risk. So sometimes the areas of risk that we identify finish. And therefore, the overlays are released.

But we always, unfortunately or fortunately, find new areas of worry that drives the replenishing of the overlays at exactly the same level they were before. And we will do that until when they release, we look out and we say, "Wow, there is really nothing else. There is no point in maintaining them." And hopefully, we will do that without having had to use them to contain our cost of risk, but we don't know. Nobody knows, okay? So that's the point. So for us, overlays are an insurance policy, but one that will pay up and propel our net income if it doesn't need to be used because we are all wrong, and the cycle of risk is benign and will remain benign for the foreseeable future, which everybody doubts.

The second -- the first question, Vodeno and the growth and et cetera. So we did a step that no other bank had done, which is instead of experimenting with external providers on modernizing our core banking system, modernizing our data platform using AI by lack opportunity, relationships, we found what we believe after diligence to be one of the best, if not the best, core banking system platform of external providers out there.

Why do I think it's one of the best? Number one, the breakeven point of that platform is 2/3 to 70% below ours today. And by the way, it's not because ours is not good, but because ours is legacy, and theirs is not. It's all cloud native. Second reason, it is flexible. A lot of this platform, you can do transaction and payments. You cannot do multiple products. With Vodeno platform, you can. So because of that, we bought it. And I think we bought it at an attractive price. And I think that it allows us to bring in 200 engineers that we can use on the side of a group as a sandbox to experiment on things. A lot more exciting job than our continued rationalization of what we have. But they're there.

So as we are there, we have -- we are doing a number of initiatives with them. One is the new entry into Poland. And people look at it as the new entry into Poland. I don't look at it as the new entry into Poland. I look at it as Vodeno with this breakeven point at that level with a digital-first bank, which also relies on branches because we will have 40 branches in Poland. Can it got in from the ground up and make money? I'm not going to tell you how many clients we're going to get on the platform, and I'm not even going to tell you how many products I'm selling. I am going to tell you, can we make money at 20% return on equity. If we can, that's the proof of the pudding and therefore, it's replicable in other places, initiative number one.

Initiative number two, Vodeno went -- comes with an already functioning and I believe, unparalleled embedded finance platform. We're going to leverage it to the entire group, and it's an area of growth for our lending. Initiative number three, Vodeno allows us -- when our internal technology and Vodeno look at our legacy system to look at the possibility of migrating on the Vodeno platform. Incidentally, Vodeno is the only platform that has done it. We call it Vodeno Aion, but what is Aion? Aion is the ex Monte dei Paschi di Siena Belgium. It had a legacy platform like all of us [ first ]. It was migrated in full to Vodeno in under a year.

So not the scale of UniCredit, not the scale of our unique banks, but it worked. So it's premature to tell you when, how is it possible. But certainly, in the trajectory of looking at what we can do to continue to modernize and migrate that is considered as it is considered every time we have a new initiative that is completely new to the group, moving to the cloud, do this, do that. They are -- help contribution to our own team to be able to accelerate that because we have capacity -- engineering capacity to accelerate it. So for me, Vodeno is an outstanding sandbox and an acceleration levers for us that we're experimenting with, and I'm very, very happy to have.

If you look at what will take for the EC -- to the European Community to allow banks to move with real mergers in Europe? I think you can look at it in two ways. Way number one, we need a banking union to do cross-border merger. Then how long is a piece of strength? You need to ask them. Because everybody says we need it, nobody wants to do it, okay? You can look at it in another way, regardless of a banking union, can we do cross-border merger and extract value? UniCredit can. I don't think anybody else can. But that may be arrogant from our standpoint, but I think we can because of the setup that we have with 13 plus 1 banks, common factories, common -- increasingly common technology platform, data platform, procurement, strategy, vision, purpose, talent, university, et cetera. It's just a container that accelerates and extract more value than they could individually from every bank that chooses to partner with us.

In addition to that, we believe that our blueprint from running transformation and banking can extract value from a number of banks even if we're not doing an in-market merger. And in addition to that, and most importantly, we are in 13 markets. We are not hostage of any one market, and we can always look.

Having said that, if you ask me what the time of everybody at UniCredit has been dedicated to across the board and even more so in the last 6 months or 3 months or 4 months? It is providing you with an underlying performance that accelerates and the new plan that you will see from '26 onwards. It is not thinking that M&A is the only solution for us to buffer growth which is what people who cannot grow anymore have to think. So we will look at M&A if it accelerates, and we are very happy not to look at it. If it doesn't, in the same way, we were very fast to take the opportunity on the stakes. And we will not do anyone because we're moving in a direction without needing anything more. But if there are opportunities, we move fast. If they are not, the core is UniCredit at its foundation.

We will now take the last question from Manuela Meroni, Intesa Sanpaolo.

The first one is on the revision of the taxation of the dividend paid on the EU subsidiaries. I'm wondering if you expect any refund following such a revision?

And the second question is on your strategy in Italy. It's clear that now you are focusing on the organic growth, but I'm wondering if you could be still open to inorganic growth? And in that case, what would be the area in the business in which you may potentially be interested in?

Okay. So answer to your question. Without wanting to speculate as things are constantly moving in our countries and in the rest of Europe, I would be positive on the answer to question number one, do we expect any refund following the revision of the taxation of dividends paid by EU subsidiary. Because it's supported by a clear deliberal decision.

Strategy in Italy would be -- would you be open to inorganic growth? And if so, in what areas? We're always open. We're always open. But if you ask me, it's almost like I said to someone, what is the possibility that you go on Mars? It's possible. It's not probable in the short term. And it's not probable because of all the reasons you know very well. And -- but most importantly, because yet again, it was -- I got confirmation that when you do M&A, you slow down your own franchise significantly. I think that the revived momentum that Italy is experiencing now and the commitment they are making to themselves to gain market share, creates a ton more value than being in a situation where because of now the lens of regulatory and political approval, we are all in a swamp for a year before being able to move anywhere. And where a lot of consideration that are not value creation or certainly not value creation for the shareholder of UniCredit cloud judgment.

So for us, we look. If there are good opportunities, we are there. If people are interested in creating value, we will run. But we think that we can achieve a lot organically, and we will demonstrate it through 2026 to '28. And that's where the focus is, I would say, mostly, if not exclusively. If something comes up, as we have demonstrated, we're always very quickly to get to move, but we do not expect that something will come up.

Okay. Gentleman, that was the last question. Thank you.

Thank you very much.

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

It's second day of our financials conference, 30-year anniversary for us. It's a big year. And second day of conference, of course, is as strong as the first, and we couldn't make a better start than with our next speaker. I could say there's no such thing as an annual financials conference if Andrea Orcel is not with us. So thanks, Andrea, for joining us, CEO of UniCredit. We're going to use the usual template. We'll go through some questions, and we'll try to leave enough time for Q&A from the audience.

Now maybe we can start. I mean, yesterday as well, the theme at the conference has been growth. And particularly for the domestic Spanish, the message has been quite upbeat. Low visibility when it comes to growth in Europe, and the bank's inability to deploy some of this capital to fund balance sheet expansion has been a bit of a drag on valuations. And so my question for you is what it's going to take, in your opinion, for European banks to be able to sustain loan growth? And what are you seeing on the ground given that you're one of the larger pan-European banks?

So I think we need to distinguish the second half of '26 -- of '25 and the first 9 months of '26 from structurally what is happening. If we start from structurally, we come from a situation that for years we had negative rates. We had very slow to negative GDP growth. We had cost of risk at 50, 60 basis points. This is sector-wide. Banks were deleveraging. They didn't do what they did in the U.S. They took 10 or 15 years to do it. And now if you look at it looking forward, you have about 300 basis points difference in the rates level. And that for a bank that is a commercial bank with 60%, 70% of NII, it's a hell of a difference. So it's structural.

Secondly, I think generally, in Europe, you're at 25, 30 basis points of cost of risk, stable. In our case, we're lower, but stable at that level. So there is no more of that. GDP is not as exciting as the U.S., but I think Europe is at 1.5%. I think when you look at the realities, for banks, it's more -- it's closer to 1, at least in our perimeter. So you have a little bit of GDP growth. And banks are no longer trying to retrench, but they're trying to grow. So this is structurally much better. That's the first point. And that will not change. And therefore, when you compare pre '21 to now, it's two different worlds. And it's going to be a lot closer to what it was for Europe pre-financial crisis to now. So this is the first point.

The second point is, I think -- I hear a lot about loan growth, and I think you need to take it with a pinch of salt. And the reason for saying that is GDP growth, as I said, is growing 1.5% in Europe. But if I look at the core economies, Italy, Germany, where we are in general, 1%. Secondly, if you look at consumer confidence, it's down. It's not up. I'm talking short term. Thirdly, we have a, on average, 150 basis point shock on rate between last year and this year, on average. But I think people do not realize how long does it take to convert a shock on rates into NII.

I mean it takes time because you need to roll your book through it. And therefore, for that reason, I was saying the second half of this year, the first half, the first 9 months of next year, where we're going to see another 30, 50 basis points of compression on rate for a total and then stabilization with a lag effect are going to be the most difficult. As we've said many times before, there are a number of government interventions in a number of economies. Germany is the one that comes most to mind. And already at the beginning of the year, we were saying this is great. This is not great for '25. It's great for '26. Why? Because it takes time to deploy and because while everybody waits for the deployment, people are frozen and they do not push.

So I think we have a situation where structurally, I'm very positive. Most banks will give you a lot of views on '27 and '28. They're a little bit more vague on '26 for exactly that reason. And I think in a way, we think it's a straight line between now and '27 and '28, and it is -- there is a very difficult passing point between the next 12 months from now. And then there is a lift as rates have stabilized and everything is going to come through, as GDP is more stable, as the spending comes in and a lot of other things start weighing in.

The other thing that I think is important is you cannot manufacture loan growth. So either there is or there isn't macro-wise. If there is, you run on it, and that's great. If there isn't, in order to create it, you drop margin. I keep on repeating that because sometimes it doesn't go very far. EUR 1 billion of loan growth for us is [ EUR 30 million ] of revenues and EUR 80 million of capital absorption. You can make your own return on investment on that. 1 basis points of margin for us is EUR 45 million, so 3x the loan growth of EUR 1 billion and no capital absorbed.

So if in this audience, you're thinking, what do I do? I get another 1% of loan growth and I sacrifice 5 basis points in margin, or I defend my margin as much as I can, and I write the loan growth that I should be having without losing market share. And that's a question. And the question is answered on what is the NII ROAC of all the banks, because I can get you loan growth and I can get you NII growth. Can I get you those 2 things with an NII ROAC without cross-selling at 20%? No, I cannot. Now you can tell me go to 15%, but a lot of banks are below 10%.

The second thing is, can we sustain the levels of profitability that we have achieved? We're at 20%. We are confident. Can the others get to 20%? Well, if you look at the targets for profitability of the European banks, they're very uneven. There are some at 20%, there are some at 15%, there are some at 12%, there are some at 10%. So I think a lot of it has to do with that. So margin is important. And our strategy going forward is linked to maximizing the loan growth that we can get without overpushing, without buying it, but maintaining the margin to maintain the profitability.

The second part that makes European banks different is how much do you get on fee income and from which factors of fee income. So at the moment, if you are primarily exposed to investment and insurance, you're flying. If you're more broad, you're not. But the point is, over time, diversification wins. That's the other thing. They are not uncorrelated. If you have a lot of loan growth, usually your fees lag. If you have a lot of fee growth, usually your loan growth lags. So in a lot of expectation is people are taking it as silos and decoupled one from the others. We are not decoupled one from the others.

If I do a certificate, it will have an impact on my NII. It will have a different impact on my fees. And so that is a little bit, I think my view is, if I look at the sector at the moment, number one, we are very optimistic on the short term. Maybe we're not optimistic enough on the medium term. And secondly, there is no dispersion between the profitabilities and the performance of all the banks. So everybody seems to be lifted up with a tide. And I think there will be a lot more dispersion in the next 12 months.

Now you said the 20% and 20% plus RoTE that you make is one of the highest returns across banks globally, really. You partly answered this. But when it comes to UniCredit specifically, how sustainable do you think is this for you to continue to defend this level of profitability in the outer years? And maybe you can also touch on some of the management actions that you've put in place.

So for us, firstly, let me start from there. The 20% is sustainable and our base of foundation to grow from, grow in terms of growth, not grow in terms of further increasing it, but sustainable foundation to grow from. It is, in a way, the quintessential outcome of our transformation over the last 4 years. That's what we consider. When you bring it all together, growth, efficiency, everything else, where did you get? The 20% is what we look at. If you look at it, we were a complete laggard before. Now we're a leader in profitability. And this is where we're starting from.

The second point that I think is important, in my meeting with some of you, a number of you have asked and said, well, UniCredit is known for its discipline and the results it has achieved on operational efficiency. Yes, we were #6. We are #1 in cost/income. Capital efficiency, we were #10. We're #1. Cost of risk, we used to have 60, 70 basis points of cost of risk. We struggle to get to 15 at the moment.

You're not known for growth. And therefore, as you tilt for the second part of UniCredit Unlocked to acceleration and growth, how are you going to do that? First of all, I think because we were so much better than everybody else on those 3 categories in terms of delta, people, in my opinion, missed a very important topic that if you look at '21 to date, our revenue grew 45%. Look at how many banks in Europe grew their revenue 45% between '21 and to date. So we did grow, and we are definitely in the top tier.

That was pushed by a growth of fees that was one of the best in the sectors at 45%, and a growth of NII at 55%. But the NII grew at 55%, while, as you know, we completely tilted our portfolio and went from about 20%, 30% of our portfolio of lending EVA positive to now 90%. So we constrained growth on NII to move to an EVA positive portfolio that could also have an NII ROAC above 20% to prepare for this phase.

Now looking forward, we will maintain the discipline on cost/income, we're not going to lose it. On capital efficiency, on cost of risk, we have the overlays to help. But the focus is how do we use all the investment we've made on the network, on technology, on data, on the hiring of people, on all of that to accelerate the top line in the face of headwinds from rate. And in our opinion, we have the following levers. Lever number one is the investments. Lever number two is that as our portfolio is, as a stand-alone, extremely profitable, now we can afford to be a little bit more lax and go to SCVA positive or slightly negative and look at overall client profitability at the margin without moving the 20% return on tangible. And then in many of our markets, there is disruption of M&A, and we want to take advantage of that.

In terms of a strategy, what we will do on the transformation of our operating machine is more of the same. And now I see many banks are following our suit, organizational redesign, process redesign, way of working change, automation. Our new benchmark is not to be the better bank among the legacy bank, but it is to match what fintech do, because I do think that in 5 years, if you look at the progress of some of these fintech, one of them is [ Crif ] in Italy and attracts 1 client every 4 minutes. If we're not as efficient as them and we have the same client experience, we're going to get this intermediated. So that's on the operating machine, and we are confident we're going to be able to continue to progress.

On the top line, and we said it many times, linked to this volume margin profitability, we're focusing on investing and accelerating the growth, focusing -- no longer telling our network go, but actually directing it per geography, per client segment and per product. Per geography, there will be much more deployment done on CE, for example, than there will be on Austria. Per client segment, there will be much more deployment on small cap, microcap, affluent than there will be, for example, on large cap.

And products, given the factories, the internalization of insurance and the lending, there will be a lot more consumer finance and mortgages. There will be a lot more small business loan than large-cap loans. There will be a lot more of insurance and other fees than the rest. And we think that, that will allow us to gain market share in those segments and fundamentally get to a situation where stand-alone we can have a bank that gains sustainably market share month after month in the segments where we operate. Because if you don't have that, eventually, you can talk about M&A or whatever it is, but you always reach a wall. You do M&A, you step, you squeeze. But if you're not growing market share, not only growth in the segments that you have, effectively, you go back, then you do another M&A, then you go back. And instead, we want a viable model that continues to do that. So in the new 3-year ambition for '28, this is very focused on achieving that.

You've talked about M&A. And of course, the tenant financial landscape has been changing very rapidly, and that's a core market for you. Actually, those changes, you probably contributed to trigger some of them. And what's your strategy now in Italy? And how do you view your market position? I think you've talked in Q2 about market share gains. Maybe you could touch on that, too.

So Italy for us -- well, firstly, in terms of M&A, there are, let's call it, 2 plus 1 market that would make a very material change to our equity story. Material change meaning you care because there is a quantum difference in what we are and what is our profitability, our net income growth, et cetera. And that is ordered by size and impact on the rest of the franchise. Those are Italy, Germany, Poland, okay? Poland is the trickiest because by not being there and going organic, we don't have synergies, or we have more limited synergies than an in-market deal. So the others, it's not that they are not there, it's not that they are not important. Actually, the deal we've done in Romania, we are going to exceed our 20% return on investment target. But they are less material in as much as they add 100, they don't add billions, and therefore, they are less material on the equity story.

For us on M&A is, number one, the management team on UniCredit will fail if we are dependent on M&A to justify our existence. So the base plan, and this is what we've done since day 1 in '21 needs to be such that we don't need it at all. And if you look at the plan that we have, we don't. Now we also look at it over time. And as I said from the beginning, we need to be ready to take the opportunity if it's there, or at least to try and get the opportunity if it's there. If you take Italy, the positive and the negative. The negative, we tried something that didn't work, for external reasons, but now we have all learned the lesson, but have nothing to do with the transaction per se, but they have to do through government interference.

The other thing is that we confirm something that we said 3 years ago. During those 7, 8 months, 9 months, the franchise gets unfocused. Everybody is waiting for M&A, what's going to make me from my job? What are we going to do? Investments get put on hold. Why am I going to invest in client acquisition if I'm going to do a transaction, et cetera, et cetera. So when I talked about market share growth, it's because we had a plan for organic growth in the fourth quarter of last year that we were going to roll out and announce at the beginning of '25. As we launched the bid on BPM, we put it on hold. Now we reviewed it, and we're probably -- we're already in rollout, and we'll probably be going to give more detail on it in the next couple of quarters, or either with the third or with the fourth quarter results.

What is the plan? Italy is an anchor for us. It's 50% of revenue, 45% of net profit. Italy has gone from about 47% cost/income ratio to 33%. It has gone from a revenue to RWA of 5.4% to almost 11%. It has gone from a rock in the lows to one of the highest rock in the group at 33%. And it is gaining market share in the sense that I was saying, in the segment that we are targeting, we're gaining. Now we need to accelerate without an M&A. So you should expect us hiring or seeing that we hire hundreds of people per the segment where we're going. We're training them. We have new credit models for the new segments where we are attacking. We have investment in technology that are at the end of -- are almost in their completion phase. We're trying to use AI more.

I think a lot of people talk about AI, but when you look at the real impact that is having on banks as of today, it's not much. You should read an MIT report that just came out. But we are trying to do all of these things, always trying to maintain the return on tangible. So we will give more details, but I think Italy is on an upswing. And having clarity that we are going in this direction, there is nothing else, and we're not getting pulled in one direction or another is getting the entire team to accelerate, and I'm quite confident that we will deliver it.

You mentioned Italy being a core market, obviously, the second market being Germany. And as the audience know, the former German Finance Minister, Lindner, is at our conference later today. Germany, as you mentioned, is, of course, your other core market. Maybe 2 questions here. One, what are your prospects for HVB, your German bank? And two, of course, Commerzbank.

You sent a letter to the German government, which you also published on your website. I think the merits of the potential combination are clear and you've illustrated them on a number of occasions already. But it doesn't feel like the government is on the same page and feels the same way about what you feel about Commerzbank joining forces with UniCredit. So what can you do about it? And how should we think about any potential next steps from here?

Look, I think for us, Germany, I think, when we started in '21, the first thing that I got as a volunteering of advice from many investors and research analysts was get out of Germany and get out of Austria, they will never cover the cost of equity. Today, HVB has a return on allocated capital of 13%, CET1 of 24%. They have an NII ROAC of 22%. They have a cost/income ratio of 35% or 36%, and they are one of the banks that contributes solidly to what we want to do.

As importantly, I think, and this is often missed, HVB is what comes to a purest bet on Germany. Because if you look at the other publicly traded banks, you have Germany as a component of the whole. But when you look at the numbers, there are a lot of other things that goes into the numbers. If you take the numbers of HVB, it's pure Germany. International network and lending in Asia, in U.S., everywhere is not part of the equation. Consolidation of every business is not part of the equation.

What is the equation is Germany Inc. And so it gives you an idea of where Germany Inc. is going with a very big focus on Mittelstand and large corporates because HVB is not a fully balanced bank across retail and corporate. It is a corporate bank with a smaller retail component. So where are we at the moment on HVB? We're confident on the direction of travel. The heavy lifting to get it where it is has been done. Now they are probably one of the banks that needs to try and grow as much as they can in their core market, not trying to complement it through other things that get consolidated in.

There are 2 main changes that are going to decelerate -- are decelerating our growth in the short term. One, because of legacy, we used to do all the trading for the entire group in Germany. And therefore, the legal entity, which is what we report, would have the trading margin, not the distribution margin which is given to the bank, but just the trading margin. That increased revenue, but reduced the cost/income ratio, so increased the cost/income ratio and reduced the profitability, because it's not a very profitable business. That half has already been moved to the holding. The other half will be completed by the second quarter of '26. At that point, the return on allocated capital will be higher. The cost/income ratio will hold better. The total revenue will be lower, but it will be pure Germany with all the things attached.

The second thing is that because of some, let's call it, regulatory headwind that attacked Germany, I think some of our competitors have mentioned that, some segments of large corporate, multinationals, et cetera, are getting allocated a much larger portion of capital that they were allocated in advanced model. You get tapped. That changes dramatically the profitability of that segment. That was one of the segments where we're leader together with another private bank.

We are decreasing the growth rate in that segment, because if we were not decreasing it, our profitability will start going down significantly. Other people who have a lower bar profitability are increasing, while us and the other competitors are pulling back, because their ambition on profitability is closer to 10% than to 20%. And therefore, it works at that point.

So you have seen some of that in our numbers, but that is stabilizing, and we are tilting more on the Mittelstand where we don't have that issue. And the growth there is quite encouraging. So as you move into '26, we should be much more pure as Germany. The trading is gone and the profitability will be better. And we should no longer have this tilting. Because we're doing what we need to be doing now, we will be complete by the end of the year. We will have absorbed it. You will only see the tilt on Mittelstand.

So again, as we were saying before, no change. We do not need to do a deal in Germany to get there. That does not mean we couldn't create a ton of value in the deal to get there. And I think everybody realized there is a ton of value to be created at the right terms.

Yes, indeed, without going on how we got here, and you can ask. But I think today, we're in a situation where we're comfortable. And we can talk about it later, but we are in a situation where we now have full control of our 29% physical shares in Commerzbank. That 29% is getting consolidated. Just use your consensus for '26 or '27 or '28. We're taking in 30% of it. We have an offset that we are reducing in terms of cost of the hedging we have because the entire position is covered on the downside to improve capital efficiency, but also to put us in a strong position if something happens. And that is going to -- and if you look at the return on investment on that, it's 20% plus. And it's locked at consensus.

If you were to invest today in Commerzbank, same you would get 9%, 10%. And if you were to buy back our own shares, you would get 11%, 12%. So we've locked 20% on a strategic stake that gives us optionality. But because we've locked 20% that is distributable in line with the rest that we're doing in the group, we don't have any pressure. We can just sit there. We're no longer hostage of mark-to-market. We are no longer [ everything ] and see where the bank goes and wait. So everybody would like us to move, [ aggress ], et cetera. We're just waiting, and we're going to see. If things go well, we can't be happier. And if things don't, then all the investors are going to have a certain position.

With respect to Commerzbank and the government, look, for the government, I understand it, and I wouldn't make a parallel only on the German government. I would say that the Italian, the Spanish, the Portuguese, the Polish, the German and many others all have a view on banks that brings them to be a lot more involved in the decision and to interfere a lot more than they did in the past. And that, I think, is defensible, because it is a key sector, and I hope people realize that without the gasoline that strong banks and capital market give, there will not be transformation of Europe, because there isn't enough money going around.

So that's justified. The problem is that capitalizing on that through distraction, misrepresentation, myth, again and again and again, certain targets create across Europe the perception that transactions are good or bad, depending what they think, not what shareholders and the other constituencies fix. And therefore, that leads to a transaction that may be suboptimal because there is this change of this interference in the process. From our standpoint, we're respectful about the government. It is a critical stakeholder. We hope that they will see the light over time. And we hope that also Commerzbank will see the light of all time. But in the meantime, we have no pressure. We're sitting and waiting and seeing how they develop.

I'm conscious of time. There was a banking forum in Frankfurt a couple of weeks ago, and I think that showed that 78% of the audience believe that in one way or the other, you'll be successful in a merger with Commerzbank and that will happen eventually. How do you explain this disconnect? And maybe I'll ask you another question together so maybe we can be a little bit more efficient. In your Q2 numbers, you stated that distribution would amount to at least EUR 9.5 billion this year, and I think you said in excess of EUR 30 billion over '25 and '27. Since then, you started deploying some of the capital -- 200 basis points of capital to stakes like Alpha Bank and Commerzbank. How is this going to affect your distribution outlook?

Look, I was asked the same question in Germany. I cannot comment on what the audience think, but maybe it is an audience that looks at facts and figures and says that over time that will prevail on distractions and attacks and everything else and it's just a question of time. But I cannot -- in my opinion, there are certain transaction in Europe, some of which we are involved in, others not, but if left to the market, would create a lot of value for all of this economy and a lot of value for the shareholders of those banks. And I might say a lot of value for the employees and the clients of those banks. So maybe they are more focused on that than on the continuous find of new reason why to say that something will never work or reasons that actually are not factual. So I'm not going to comment on that.

What I would say with respect to distribution, and this is -- thank you for the question. So let's take them one by one because there is a lot of moving parts. So point number one, just to be clear, we're in execution of the first tranche, and then it will be soon by the second tranche of the 2024 share buyback, remaining share buyback that we had to put on hold because of BPM. We couldn't move our share price while we were in a transaction. And then we have restarted straight after. So we're going to complete that. So that's there.

Secondly, we confirm and I confirm that this year, based on what we have, we will distribute EUR 9.5 billion between cash and shares. Those EUR 9.5 billion are going to be 50% in dividends and the rest is share buyback. So that's confirmed. Now you get to the projection between now and '27 and beyond '27, okay? Now a few things need to be considered. In that projection, we said until today that we were going to distribute in excess of 90% of net income of each one of the 3 years, but that was total distribution. It included the ordinary, i.e., the percentage of the ordinary net income plus the part of excess capital return, which at the end of Q2, we said it's somewhere between EUR 8.5 billion and EUR 10 billion, okay?

So the numbers are the same but different. What has happened is that we are going, between now and the end of the year, to have deployed something between EUR 6.75 billion and EUR 7.5 billion of that excess capital between stakes and other things like insurance internalization, et cetera. Yes, at a 20% return. So we are very happy we've done that. So versus the share buyback, I have 2 positives. One, I locked it in now and you know what it is. It's no longer I'm going to do a value of share buyback, and we'll see where your share price goes to assess what is the impact. It is locked in today. Actually, you have a price at which it is locked in.

Two, instead of getting 11%, 12% return on investment, we have locked 20%. Because of that, we have improved VE to a much greater extent than we thought we would improve it, meaning that between now and '27, instead of getting to circa EUR 10 billion of net income, keeping the 20% return on equity, we are going to be well above EUR 11 billion in '27. You can do your numbers, we're well above. So we have now a 20% improvement in net income between the end of '24 and the end of '27.

EPS and DPS growth are now going to be confirmed to be growing at double digit between '24 and '27. Before we were saying strong, we couldn't confirm double digit. Now we are at double digit. However, it is clear that if I have spent EUR 7 billion or EUR 7.5 billion or EUR 6.75 billion in stakes, they go off the excess capital. So the excess capital was at EUR 8.5 billion to EUR 10 billion. It goes off because of deployment. It was always returned or deployed. We deployed it.

The second thing that has happened is just if you took a pro forma of -- and it's not going to be the number, because we expect authorization from ECB on the consolidation of Alpha in the fourth quarter, not in the third, and Danish Compromise in the fourth quarter, not in the third. But if we pro forma for Alpha full consolidation in the third and we pro forma for Danish Compromise in the third, we would be at a CET1 ratio -- and don't adjust anything else, starting from the 16.2% where we were, we would be at a CET1 ratio of about 14%, okay? So at 14% versus our target of 12.5% to 13%, you have anywhere between EUR 3 billion and EUR 4.5 billion of excess capital, okay?

So if you sum it up to the EUR 7 billion, we actually have created a lot more excess capital because we deployed well, because instead of being at EUR 8.5 billion, EUR 10 billion, effectively EUR 7 billion, plus EUR 4.5 billion gets you to EUR 11.5 billion; EUR 7 billion plus EUR 3 billion gets you to EUR 10 billion. So we are at EUR 10 billion to EUR 11.5 billion. But of those, EUR 7 billion have already gone out.

So we have a formal okay, but we will confirm it by the Q3 numbers. So we're going to change the way we guide you on distribution, and we're going to say that instead of total distribution being in excess of 90%, we're going to say ordinary distribution, so excluding the return on excess capital are going to be at circa, I would say, 80% of net income for all of these years. And we will go back to assess the amount of excess capital that we will return to you year after year until '27 and beyond on where it is at the end of the year. So on top of this 80%, there will be the return of the excess capital over time to top it up and bring it up.

I think it is a lot easier to understand. The 80% is recurrent and continues. Incidentally, the 80% will be on a higher base because we are distributing what's happening with Commerzbank and Alpha. Therefore, for example, the dividend distribution, if you believe the guidance, is going to be in excess of EUR 15 billion. Before it was below. But like this, it is clear what is ordinary recurrent and will carry through after '27, which is a lot more, because in the old plan, we would return everything to '27, then it would step down because there was no more excess to give and it would come down. Now we are elongating that line to go through '28, '29, '30, by having a deployment that is better than what we had before. So that's where we are there.

Thank you. Shall we open up for questions because I'm conscious we have 4 minutes left, and then we can always come back. Questions from the audience, please? Please raise your hands and we'll come to you with a mic. There's one there in the middle.

I would like you to comment, please, on the efficiency of the German government plans, both the productivity of the fiscal contributions that they might put into the economy and also whether you think they'll be successful or not with cutting red tape, which I think is a big part of the productivity challenge.

So I think in general, the government plan is great. I mean nobody can criticize it. Maybe if you need to turn around and try to find something that is less great is I would have wished we had a European plan for everybody to contribute. So Europe comes together and we push together. But the plan will be a very strong impulse on Germany, and it will also have a very strong carryover on other market around because, obviously, Germany is the locomotive of Europe, which, by the way, is one of the reasons why I am so positive on Germany.

In terms of the efficiency, we've started having some details. We don't have all the details. I am quite sure that given the level of interaction with everybody, it will be structured efficiently. So I mean, the best way to get as much as possible out of the plan, and I go back to that, is instead of getting it to weigh directly on German finances, you leverage capital markets and you leverage banks with guarantees, et cetera, to multiply its effect or maintain the same impact with a lesser deployment, which is why you need a stronger bank to do that. Otherwise, you hit concentration. So I am quite positive.

My only point is it is a massive plan. And I have seen what has happened on similar plan in Italy and in another country. To cascade this down, and depending if they're going to take it centrally and they're going to take an agency to do it or they're going to cascade it down to the various states or whatever, let's call it, the bureaucracy is quite significant, but not bureaucracy in a negative sense. I mean, it requires a setup. It requires an administration. It requires a team. It requires each company understanding what they need to do, preparing the file, getting it certified, getting the subsidy. So it is not like that, which is why we said it's not going to happen in '25.

I think from what I hear, we're going to have a lot more momentum in '26 and beyond. And I am quite optimistic because I think if you look at the degree of debate and dialogue between the government and the industry on what needs to be done, where, how, what is the best way, it is very encouraging. But by the same token, while there is that dialogue, if you are a company that is expecting to be impacted in some way, you're waiting. You're not doing things now, you're waiting. And therefore, that is why there is a little bit of a grind with an acceleration later. But in general, I have quite a positive view.

Time for a very last question. Maybe you can wrap up things, but we've got 1 minute or so. This time last year, on our stage, you were -- basically, we were testing the boundaries for Europe's project, where you announced the stake in Commerzbank. Then was the bid of Banco BPM. We can't really say that either of these governments have welcome you with open arms. Greece, on the other hand, as sort of you bought a stake in Alpha Bank, it's been almost a red carpet treatment with Prime Minister, Finance Minister, CEO, welcome you on the Acropolis in Athens. Is there anything we can infer from Europe's integration, capital markets and the competitiveness of the single market from what you've seen?

So I think -- and I think it's a little bit difficult to look at it that way. But in general, I'm more optimistic than I was before. What do I mean by that? Certainly, the government interference is at maximum and certainly it's getting, in my opinion, used or manipulated in order to derail transaction that should otherwise take place. However, the dialogue between governments and the dialogue between government and the European Union and the dialogue between government, European Unions and banks on what makes sense, what doesn't make sense is very high. It's at a very high level. In the past, there were all the statements of banking union, et cetera, et cetera, but you left the room and there was no follow-through. Here, there is. So the engagement is more than it has ever been in the last 10 years since I remember.

The second thing is when government pushes in a different direction that is conflicting or perceived to be conflicting with the European Union, the European Union is taking a position that is much stronger than it was before, much more proactive. So you see that there is an attempt to bring that convergence that before, there wasn't.

The third thing, we touched it upon. I think that many governments in Europe, maybe not the German one because of their finances, but most of the others are going to soon realize that if the European Union needs to do a transformation in infrastructure, in defense, in energy, in all their industry to grow and compete with the other economic blocks, the finances of the states are not enough. Balance sheet of the states are what they are. And by the way, balance sheet of the states always end up in the pockets of the taxpayers as well. So I think the more they look at that and the more they look at the impact that stronger, larger banks and capital market can have on the acceleration of Europe, I am optimistic that they are looking at that.

So if you look at the difference with Greece, I can only rationalize, but I think they have had their trouble. I think they have beaten the bullet. I think today, Greece has a better credit rating than Italy. Who would have said that 5 years ago? And I think they have realized that what counts for their population, for their wealth, for their thriving, for the opportunity for the younger population is investment and growth. And if they can get, in an orderly way, in more investment to come from the outside to push that, they're very embracing of that investment as opposed to other countries that maybe have this view that, well, there is investment and investment, and I don't like this one because it's not my country or it comes from a part of another country, but it's not, because we also have that debate. Which part of the country is investing and should I accept that or not. So I think Greece in that is ahead. They're not the only one. I think the others, in my opinion, there is a trajectory and hopefully, it goes in the right direction.

Perfect. Thank you very much, Andrea. Thanks, everyone.

Thank you.

Good morning, ladies and gentlemen. Before I hand over to Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded.

Ma'am, you may begin.

Good morning, and welcome to UniCredit's Second Quarter and Half Year 2025 Results Conference Call. Andrea Orcel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano Porro, our CFO. As always, please limit yourself to 2 questions.

With that, I'll hand over to Andrea.

Good morning, and thank you for joining us today for UniCredit's remarkable second quarter results. Obviously, yesterday's announcement regarding BPM is in the background. Given the continued uncertainty for UniCredit and its shareholders generated by the Golden Power, we have decided to draw a line under this transaction and move on. As today's results and upgraded guidance demonstrate, we are accelerating beyond expectations, particularly in Italy, gaining market share profitably and raising the value that we expect to create for our shareholders. As CEO of UniCredit, I believe that my job is to create the most value possible for our shareholders, whilst strengthening our bank. M&A is just a tool, which depending on the condition of a transaction, may or may not help in achieving that. While our decision has been difficult, it is absolutely the correct one for all our stakeholders.

Going back to results. We are operating in a rapidly evolving banking landscape, one that continues to challenge the industry. Last year, the overall macro propelled us. This year, it is very different. And yet, we are on track to beat last year record, becoming the benchmark for the sector across all KPIs. We are proving that UniCredit Unlocked is a winning strategy, but our strong and differentiated model delivers exceptional performance, but we can adapt, execute and lead with the confidence while we continue to invest, strengthen and accelerate. The measures that enable our UniCredit Unlocked acceleration phase are already well underway and exceeding expectations. None of this would be possible without our people. I thank my colleagues once again for their stellar professionalism and dedication. Their execution continues to be nothing short of exceptional, and the demonstration of the success of our culture.

The second quarter marks a structural step forward in our journey. It is another quarter of setting records, growing returns and accelerating. We posted record net profit and return on tangible equity, driven by core revenue growth, both in the half and in the quarter, coupled with cost of risk discipline and continued operating and capital excellence while keeping P&L buffers intact. These results come not from extraordinary items, but from the strength of our core business. Our franchise once again outperforming across all regions and more than offsetting stronger headwinds.

Such results clearly demonstrate the strength of our strategy and the progress in the execution of our transformation as we are shifting focus to revenue acceleration. We're well underway with the execution of our accelerator, but shall positively contribute to our results from 2026 onwards. These are the internalization of life insurance in Italy, which was executed in Q2. The integration of Alpha Bank in Romania, which shall be executed in Q3 and the Poland reentry, which supported by Aion-Vodeno, which shall be launched in Q4. We are enhancing our acceleration from '26 onwards, even further by equity consolidating our stakes in Alpha, crowning a very successful partnership, and in Commerzbank.

We upgrade 2025 guidance once again, purely from the greater progress on execution of UniCredit Unlocked Phase 2 as the accelerator, and the equity consolidation will only kick in from 2026 onwards. We're also upgrading our ambition for 2027 from both our core acceleration and the impact from accelerators and equity consolidations.

Our record first and second quarters have made the first half the best in UniCredit's history. What makes this performance so remarkable is its quality across the board and its ability to more than offset greater-than-anticipated headwinds while continuing to invest. In Q2 alone, we achieved a net profit of EUR 3.3 billion, EUR 6.1 billion in the first half. In order to better compare our year-over-year underlying performance, we're excluding the significant net positive one-off -- sorry, the significant -- I am sorry, one second, the significant net positive one-off -- I'm missing a page, here we go. In order to better compare our year-on-year underlying performance, we're excluding the significant net positive one-off impact primarily related to Commerzbank equity consolidation, life insurance internalization in Italy and our front loading of extraordinary provision for risk and charges to better protect our future. This is something that can only be done from a position of strength.

Adjusted for one-offs, we achieved record net profit of EUR 2.9 billion in the quarter and EUR 5.7 billion in the half. These numbers reflect strong performance across the board. Core revenues, defined as NII, fees and dividends, grew 1.3% year-over-year in Q2 and 1.5% in the half, a resilient top line, more than offsetting stronger headwinds. Net interest income held up better than expected as volumes grew in our targeted segments without compromising margins.

Fees grew 3.6% in the half and were slightly up in the quarter on a like-for-like basis, even in the face of market volatility, Liberation Day and more general geopolitical uncertainty that contain fee growth and boost the trading. Trading, excluding one-offs from strategic investments, primarily related to the equity consolidation of Commerzbank, grew 22% in the half and 16% in the quarter, benefiting from greater client activity.

At the same time, we further improved our operational efficiency. We reduced cost by 1.5% in Q2 and 1.4% in the first half on a constant perimeter, leading to a further improvement of our cost/income ratio reaching less than 36% without impacting our net profit as we front-loaded the related integration costs in Q4 of last year and do not need to do it this year. As such, gross operating profit went up almost 3% in the quarter and 4% in the first half.

Capital efficiency continues to improve with net revenue to RWA reaching 8.8% in the quarter and 9% in the half. As a result, we delivered best-in-class return on tangible equity, excluding one-off, of 20.6% in the quarter and 21.3% in the half. On a per share basis, we grew EPS 26%; DPS 31%; and tangible book value per share 19%, including dividends. And we've done all this while investing and keeping our more than EUR 3 billion in P&L buffers intact, reinforcing the strength and sustainability of our future trajectory.

The table highlights the broad-based performance of our franchise. It strips out the noise created by one-off items. Our top line was impacted by EUR 335 million trading one-off driven by hedging costs related to the equity consolidation of Commerzbank, only partially offset by the gains from our strategic portfolio. This top line impact was offset below the line, the net operating profit line, by an overall net positive one-off of EUR 675 million. EUR 653 million from the revaluation of our life insurance stakes, EUR 230 million in bad will linked to the Commerzbank equity consolidation, EUR 207 million in front loading of provision for risk and charges further reinforcing our prudent and forward-looking approach to risk. So while the quarter includes significant overall positive one-offs, the underlying message is clear, our core performance, ex these one-offs, is well ahead of our plan and supports enhanced distribution.

Our gross revenue grew 2% in the quarter and 2.7% in the first half, excluding one-off impact. Net revenue was impacted by cost of risk normalization, but still grew 0.5% in the quarter and 2.2% in the first half, excluding one-off impact. The resilience and quality of our revenue base is proven by our core revenue growth of 1.3% in the quarter and 1.5% in the first half as a result of strong fee and dividend income and resilient NII performance. This broad-based delivery gives us the confidence to upgrade our net revenue guidance for the year.

Our net interest income has proven more resilient than expected even in an environment of accelerated decline in interest rates. In Q2, NII declined by just 0.3% quarter-on-quarter, supported by increasing volume in the targeted segments, combined with our continued focus on protecting margins over volume. We continue to have excellent pass-through management with the average in the quarter down 1.7 percentage points to circa 31%, well ahead of plan. This approach delivered results, maintaining our NII RoAC around 20%, firmly best-in-class. As a result, we are upgrading our full year '25 NII guidance. We now expect a mid-single-digit decline versus full year 2024.

Asset quality remains strong and stable, with our gross NPE ratio at 2.6% and our net ratio at 1.5, both steady. Cost of risk remains structurally low at 9 basis points for the half, broadly flat quarter-on-quarter, while up versus previous year due to the larger nonrecurring releases in Q2 last year in Central and Eastern Europe. Our default rate remains broadly flat at 1%, excluding 2 single names at 1.2%, including these. Our NPE coverage remains stable and we maintain our EUR 1.7 billion overlays intact. They will act as a further buffer against any potential deterioration in asset quality or to further propel profitability going forward. On the back of this solid trend, we are confirming our full year 2025 cost of risk guidance of approximately 15 basis points.

Fees. Fees grew 4.1% in the first half and 1.1% in the quarter, excluding the payments one-off we flagged 1 year ago. Our fee to revenue remains top tier at 35%, underscoring the strength and diversification of our revenue stream. We saw solid contribution from investment products, insurance and client hedging, which compensate for lower performance in financing, which suffered from mentioned macro uncertainty. Year-on-year comparison in payment are misleading due to one-off impact in Q2 2024, but benefited from renegotiation of contracts and changes in the timing of incentive scheme this year. Excluding these factors, payment would have been broadly flat. We are confirming our 2025 fee guidance of mid-single-digit growth and remain confident in delivering our EUR 1.4 billion fee growth ambition by '27 versus 2024.

We continue to improve our operational efficiency. Cost declined 1.4% in the first half on a constant perimeter, even as we continue to invest in our people, in our technology and in business growth. This disciplined approach allows us to balance efficiency with long-term value creation. Our cost-to-income ratio remains best in class, standing at 35.5%, excluding one-offs, a remarkable result, especially considering that strategic investments such as Alpha Romania and our Poland reentry are still ramping up and have yet to fully contribute to the revenue line. On the back of a strong delivery, we are improving our full year 2025 cost guidance to below EUR 9.6 billion, lower than full year '24 when adjusted for perimeter effect.

This quarter, UniCredit generated EUR 2.4 billion or 82 basis points of capital organically and EUR 3.4 billion or 119 basis points overall. This more than absorbed the impact from model changes of 20 basis points, the distribution accrual of 86 basis points, while also increasing our CET1 ratio to 16.2% pro forma for the Danish compromise. We maintain our position among the most capital generative and strongly capitalized banks in Europe. Our capital generation and level are strengths that supports investments and best-in-class distribution. In the half, we accrued EUR 5.2 billion, of which EUR 2.6 billion in cash dividends. We continue to hold EUR 8.5 billion to EUR 10 billion in excess capital above our target CET1 range of 12.5% to 13%, providing further flexibility. As previously discussed, some of that excess is more volatile, and we shall consider it accordingly until it is secured.

Looking ahead, we expect the CET1 impact from equity consolidation of the full stakes in Commerzbank and Alpha Bank to consume circa 130 basis points. We confirm our full year 2025 organic capital generation guidance are broadly in line with net profit, which has grown.

Let's now turn to the engine behind these results, our region and product factories. In a persistently complex and volatile environment, the breadth and depth of our geographic footprint, client and product mix have proven to be a key differentiator, each contributing uniquely yet consistently to our growth trajectory, reinforcing the resilient balance and scalability of our franchise.

Italy remains the cornerstone of UniCredit's performance and our strongest source of high-quality earnings. It is delivering quality, profitable growth, setting new records across all KPIs. Gross revenue reached EUR 5.7 billion, broadly flat, excluding prior one-offs. NII declined 5.2% in the half and 3.2% sequentially in the quarter, primarily reflecting the rate decline. However, this was partially mitigated through disciplined pass-through management and targeted loan origination, up 12% year-over-year. Our focus on margin over volume translated into a strong NII RoAC of 24%. Our planned focus on SME resulted in an acceleration of our penetration in the segment, with EUR 7.5 billion additional or 41% increased financing delivered to this segment. Our progress was recognized by Euromoney that awarded us as Europe and Italy's Best Bank and Best Bank for SMEs.

Fee income rose 2.3% in the half, driven by solid momentum in investment products, advisory and financing, and flat in the quarter adjusted for one-offs. Our fee-to-revenue ratio stood at a top-tier 41%. Asset quality remains robust. Cost of risk stood at 26 basis points, down 3 basis points year-over-year, while our gross and net NPE ratios held steady at 2.6% and 1.4%. Adjusting for state guarantees, the net NPE ratio dropped to just 0.8%, almost entirely covered by our Italian overlays. Effectively, we are 0 net NPE bank in Italy.

Operational efficiency improved as our cost income ratio reached 33.4%. Cost decreased 2.2% in the half and 2.3% in the quarter, despite sustained investment in talent, in technology and in business growth. Capital efficiency remains strong with net revenue over RWAs at 10.8%, flat year-over-year. Profit before tax rose 4% to EUR 3.5 billion and RoAC reached 34%, reinforcing our market leadership. Organic capital generation was solid at EUR 2.4 billion. We continued investing in our people and client and did 430 new hires and delivering over 410,000 hours of training to our people, a 20% increase year-over-year. We're enhancing clients' experience through buddy, our digital branch; and Banco Smart 2.0, with a rollout of last generation ITMs to the whole network by year-end, while continuing to refurbish and redesign and digitalize our physical branches.

We continue to invest in technology, with the UCX initiative significantly improving the speed and quality of our client journey. We have also enhanced our product offering with secure digital asset solution, including crypto ETPs and capital protected certificate. Italy exemplified our disciplined, high-performing and client-focused model.

Germany remains a strategically vital anchor for the group and a consistent contributor to our earnings quality. It is delivering another quarter of quality, profitable growth, setting new records across all KPIs, leading to the strongest first half in over a decade. Gross revenues reached EUR 2.9 billion, up 3.2% in the half and 2.5% in the quarter, supported by strong demand for hedging products amid market volatility. NII declined 3.7% in the half, but increased 1% when adjusting for refinancing volume growth. Sequentially, it rose 3.3% without compromising our strong NII RoAC of 22%. Fee income was stable in both the half and the quarter. Investment and hedging fees grew strongly, offsetting lower fees from weaker financing activity. Fees to revenue stood at 31%. Credit quality remains solid, with gross and net NPE ratio, respectively, of 2.4% and 1.5%. Cost of risk remained stable at 12 basis points, while maintaining overlays intact.

Operational efficiency improved, with cost income ratio down to 36.8% and costs declined 2% in the half and 1.2% in the quarter despite continuing investment in technology and in our people. Simplification continues to drive efficiency without compromising our network or frontline, a clear differentiator vis-a-vis some peers. Capital efficiency improved further, with net revenue to RWA at 8.3%. Profit before tax rose 12% to EUR 1.7 billion, RoAC exceeded 24%, up nearly 3 percentage points year-over-year. Organic capital generation reached EUR 1.3 billion. Our S&P rating, upgrade to A minus, validates our progress, and we are proud to have retained top employee certification for the 15th consecutive year.

We remain the leading FX rates and commodity hedging provider for the corporate sector in Germany. We continue to invest in innovation through partnerships like Rise Europe, investment like Banxware, and enhancements such as new security platform, creating almost 150 jobs. This year marks the 20th anniversary of UniCredit combination with HVB. We are proud to celebrate it with a top-performing bank that is leading across all KPIs and supporting the real economy, especially the Mittelstand. Our group implicit exposure to Germany shall increase from 2026 onwards, reflecting the planned progressive equity consolidation of our full stake in Commerzbank.

Austria remains our second group anchor, continuing its successful evolution from value unlocking to sustainable growth. It is delivering another quarter of quality profitable growth, setting yet another record. Gross revenues were slightly down to EUR 1.3 billion due to NII decline, not fully compensated by very strong fees. Net revenue grew 2%, thanks to the superior quality of our loan portfolio. NII declined 8.5% in the half, while growing 0.7% sequentially, supported by strong path through management and the highest corporate lending growth in year.

Fee income was a standout, up 6.9% in the half and 5.2% in the quarter, driven by investments, plus 12%; advisory and financing plus 15%, leading to a strong 32% fee to revenue ratio. Cost of risk is an overall net reversal of 15 basis points in the half due to continued repayments. Overlays are kept intact. Operational efficiency remains central, with our cost income ratio below 39%, costs rose only 1.3%, well below inflation and fell 0.7% in the quarter. Thanks to efficiency measures, coupled with continued investment in people and in technology.

Our capital efficiency remained healthy, with net revenue to RWA at 6.9%, despite a 4.8% rise in RWAs mitigated by proactive actions. Profit before tax rose 1.2% to EUR 0.8 billion, 4.4%, excluding the new bank levy. RoAC stands at 24.1%, greater than 25, excluding bank levy. Organic capital regeneration reached EUR 900 million.

Austria started the re-internalization of issuing and acquiring, launching our in-house credit card and already onboarding 100,000 retail customers. We were proud to be named best bank for large corporates and continue to lead in innovation with simplified digital onboarding and consumer finance solution. We also strengthened our inclusive culture, earning edge recertification, launching GirlsGoFinance and supporting future talent through the UniCredit Foundation.

Our CEE region continues to be a key growth driver, combining disciplined execution with strong client momentum. Our commercial effort is driving profitable growth. Gross revenue grew 4.6% in the quarter and 5% in the half, reaching EUR 2.3 billion powered by both NII and fees. NII increased 2.4% in the half and remained stable in the quarter, supported by 10% volume growth in the half, including the contribution from Alpha Romania. NII RoAC stood at 26%.

Fee income was a standout, rising 9% in the half, 2% in the quarter, with contribution across all categories. Fee to revenue improved by 1 percentage point to 28%. Cost of risk remained positive, thanks to continued repayment. Gross provision are normalizing, but our conservative underwriting remains unchanged.

Operational efficiency remains best-in-class with cost income at 34%, 32.6% excluding Alpha Romania. Costs rose 3.1%, excluding Alpha Romania, but declined sequentially in the quarter, thanks to our focus on efficiency, while we continue to invest in people and technology. Capital efficiency remains strong, with net revenue to RWA at 8.6%, broadly stable despite an 8% RWA increase due to Alpha Romania and Basel effects.

Profit before tax declined 2.7% due to loan loss provision normalization, but would have increased by 2.9%, excluding that. RoAC remained high at 29%. Organic capital generation reached EUR 1.2 billion. We continue to invest in Central and Eastern Europe with long-term view earnings awards across Bosnia, Croatia, Romania, ESG and transaction banking.

Innovation is a key focus with initiatives like AI-powered voicebots, seamless payments and automated KYC, enhancing client experience. Our group implicit exposure to CEE shall increase from 2026 onwards through the planned equity consolidation of our stake in Commerzbank that owns circa 70% of mBank in Poland.

From the onset of the crisis, we have committed to an accelerated responsible, compliant and economically sound compression of Russia, and we have consistently delivered on that commitment. This quarter marks another step forward in that journey as we further reduce our exposure across all key dimensions. Local deposits declined 31% in the quarter, reaching EUR 1 billion or around 0.5% of group deposit, but total compression of 88% versus the first quarter of '22. Net local loan declined 19% in the quarter, reaching EUR 800 million, less than 0.5% of group loan, 89% less of the first quarter of 2022.

Cross-border lending remained flat at minimal levels. It has declined by 94% since Q1 '22, and we reach 0 by year-end. Cross-border payment decreased 17% in this quarter, reaching EUR 6.4 billion, down 75% since Q1 '22. These are now almost exclusively conducted in euro and U.S. dollars. We have materially reduced the capital impact of full Russia write-down from approximately 130 basis points on a 14% CET1 to 78 basis points on a 16.2% CET1. We remain fully compliant with applicable ECB targets, and we'll continue our disciplined business compression, also targeting a full orderly exit from retail by the first half of 2026.

Our product factories continue to deliver differentiated capital-light growth and remains central to our strategy. In the first half, Client Solutions generated EUR 6.1 billion in gross revenues, up 4% with over 67% coming from fees. Individual Solutions grew 7%, fueled by a 10% rise in investment products and 5% growth in nonlife insurance. Onemarkets AUM reached EUR 22 billion, with managed fund sales up more than 55%. We are well on track to retaining over 80% of the investment product value chain by accelerating proprietary product distribution, unlocking Alpha growth well beyond market trends.

Corporate Solutions grew 6%, with fees up 13, driven by strong advisory and client risk management. This was partially offset by weaker financing fees amid macro uncertainty. Payment Solutions delivered resilient performance when adjusting for contract one-off and incentive scheme timing. These factories are scalable as demonstrated by their use in our partnership with Alpha, client-centric and a key driver of our unlocking acceleration strategy through 2027.

We're setting records and we're doing it against the backdrop of strong -- I would say, stronger headwinds. We have already absorbed over EUR 500 million of headwinds in the first half, mainly from rate normalization and inflationary drag on cost and some normalization of cost of risk. This was not unexpected. Our performance beat consensus across all key metrics, net revenue, NII, fees, cost, cost of risk, net operating profit, net profit and CET1. This highlights the strength and consistency of our underlying business and position us to deliver our best year ever, even before considering any one-off.

What's driving this result is the execution of our strategy at pace. We're now in the second phase of UniCredit Unlocked, moving from unlocking trapped potential to unlocking acceleration. This is where we're truly scaling our story, delivering today while we continue to build for the future. Over the past 3 years, we have executed the first phase of UniCredit Unlocked with discipline and determination. We simplified and streamlined the organization, empowered our banks and our people, unified the group around a clear strategy and culture and leveraged our scale. We benefited from tailwinds. But unlike many peers, we use them to prepare for the future, front-loading investment, building over EUR 3 billion of P&L buffers and generating excess capital that we are now deploying or returning.

Today, we lead across all key performance indicators, cost income, return on tangible equity, net revenue over RWA, EPS growth and distribution. We have unlocked the majority of our trapped potential and build the momentum and resilience to enter our next phase from a position of strength.

In Phase 2 of UniCredit Unlocked, we are making a decisive shift from transforming the operating machine to accelerating the commercial one. We're executing a clear and focused set of initiatives across 4 key dimensions: geographies, clients, product and channels with our people at the core. This is underpinned by continued investment in our organization, processes, way of working, technology and data, ensuring that our operating machine remains resilient, efficient and fully compliant.

As our first half results demonstrate, we are progressing across all key dimensions supported by targeted set of initiatives. Starting with geography. We're allocating capital to higher growth region, a 6% increase in allocated capital to Central and Eastern Europe in the first half, along with a planned reentry in Poland, a clear example of this targeted approach.

On clients, our focus remains on SME and private and affluent segment, while maintaining discipline in mass market and large corporate. The EUR 7.5 billion increase in SME lending in Italy and the significant growth in private clients in Germany are tangible result of this focus. Our UCX initiatives significantly improve the speed and quality of our clients' journey.

For products, we continue to strengthen our offering and enhance its distribution, driving higher quality fee income while maintaining a selective approach to lending. Our new partnership with Wise in international payment and the rollout of Digital Asset Solutions are recent illustration of our product strengthening.

In terms of channel, we continue to modernize our physical network while expanding our direct and digital reach, enabling a true omnichannel presence. Buddybank added over 200,000 new clients in the first half, 4x more than last year, and we are continuing to redesign and refurbish our branches to support premium advisory service at scale.

Our first half also confirms our further progress on the operational side. We took concrete steps to continue to streamline our organization and invest in our people and technology. With respect to people, we hired 1,700 colleagues, mostly in the network and with early career profiles, and delivered 850,000 hours of training. Engagement remains strong with over 1,300 ideas collected through the CEO roadshows, 50% of which are or will be implemented.

For organization, we continue to simplify, reducing layer, redesigning processes and implementing over 1,000 simplification proposal received from our colleagues. On technology, data and AI, we're progressing with targeted investment, the Google Cloud partnership, Gen AI tools, digital platform like UCX and our already improving speed, efficiency and client experience.

Moving to the organic accelerator. Our organic accelerators, which are part of the plan, are gaining momentum, although their contribution to our performance will only become meaningful in -- from 2026 and beyond. Starting from next year, the internalization of life insurance in Italy, the Alpha Bank integration in Romania, and the scaling up of Poland and embedded finance are expected to increasingly contribute to over EUR 400 million additional net profit by 2027, and growing further from there.

In particular, the second quarter '25 marks the internalization of the fourth largest Italian life insurance company within the group together with EUR 46 billion of directly managed assets. This will significantly further improve our revenue mix. These aren't just projections, but a result of tangible growth levers that will enhance revenue quality and strengthen our earnings, profitability and distribution trajectory.

We are now also equity consolidating our stakes in Alpha and Commerzbank, further enhancing our profitable growth trajectory from 2026 onwards. No impact this year. We expect to consolidate around 20% of Alpha in the third quarter, and the remaining stake in Commerzbank to reach circa 29% by year-end. Alpha is the result of our welcome investment in Q2; Commerzbank is the result of obtaining all the required approval, bringing us exactly where we said we would be from the start.

Combined, they will contribute approximately EUR 800 million in additional revenues, in additional net profit and in additional distribution, net of hedging costs by 2027, subject to their respective financial performance. Both investment offers strong return of circa 20% and fully distributable. They also enhance our implicit exposure to attractive markets like Greece, Poland and Germany.

Our partnership with Alpha will continue to develop with our 20% allowing us to capture more of the value we shall create together. This will boost the original numbers of our organic plan by increasing our exposure to an attractive and fast-growing economy, such as Greece and targeted clients within. It further reinforces our already strong partnership. Based on consensus, Alpha will contribute circa EUR 200 million to our distributable net profit, with a capital consumption of circa 40 basis points at circa 20% return on investment.

Commerzbank. The equity consolidation of our stake in Commerzbank will further increase our implicit exposure to Germany, our resilient tanker, and Poland, among the fastest-growing European countries, while also accelerating our shift towards SME, private and affluent. As Commerzbank's largest shareholder, we welcome change to strengthen the bank and set it on a sustainable profitable growth trajectory. Their success has become our success. Based on consensus, Commerzbank will contribute over EUR 600 million to 2027 distributable net profit, net of expected hedging costs, with a 90 basis point CET1 impact, a circa 20% return on investment.

We will now turn to how the accelerated implementation of our strategy enables us to raise our guidance. Net profit guidance is raised to circa EUR 10.5 billion for 2025. Net revenue guidance is improved to above EUR 23.5 billion, with NII now down by mid-single digit and fees confirmed up mid-single digit. Cost of risk is confirmed at 15 basis points. Costs improved to below EUR 9.6 billion, down at constant perimeter. Consequently, we expect stronger growth in earnings per share and dividend per share with return on tangible equity guidance improved to circa 20%.

Distribution guidance is upgraded to at least EUR 9.5 billion as it also takes into account nondistributable items. Dividend, it is expected to reach at least EUR 4.75 billion, up 28% year-over-year on a declining share count. In 2027, we now aspire to reach at least EUR 11 billion net profit at an over 20% return on tangible equity, with EPS and DPS growth further boosted by earnings growth related to share count reduction through share buybacks. This will allow us to deliver '25-'27 cumulative distribution of at least EUR 30 billion, of which at least EUR 15 billion in dividend.

Our best-in-class stand-alone profitable growth story is now upgraded, thanks to a stronger-than-expected underlying performance, the confirmed execution of our organic accelerators and the added contribution from equity consolidation in Commerzbank and in Alpha. This leads to consensus EPS and DPS double-digit growth, significantly above the sector and return on tangible equity almost 2x higher than the sector and above our top peers. We continue to accelerate on our stand-alone strategy, delivering excellent current results, while laying the foundation for an ever stronger future.

Thank you. And I will now add it for questions -- open for questions.

[Operator Instructions] The first question is from Britta Schmidt, Autonomous Research.

I've got 2. First one, on the Commerzbank stake, what time lines do you have in mind for this considering that the 29% stake income is embedded in the 2027 guidance, suggesting long-term ownership is a possibility.

And secondly, with regards to the excess capital, which will be more volatile if the stake remains hedged, can you provide some sort of sensitivity around share price movements and the impact on the CET1 at 29%?

Thank you, Britta. So let's start with excess capital. It's easier. Obviously, at the end of this quarter, we are still at EUR 8.5 billion to EUR 10 billion overall, depending if you look at 12.5% CET1 or 13% CET1 as the target. The last quarter, we said that of that, about 7%, 7.5% was, let's say, more stable, less volatile, if you want to use that word, and the rest needed to be crystallized. Part of what has happened in Q2 is we crystallized part of the rest. So if I had to take a directional view, the nonvolatile part is probably around EUR 8 billion. So it has grown. Obviously, the excess capital is then declining as we deploy on the equity consolidation of Alpha and Commerzbank, between now and the end of the year, by 130 basis points, and we will update you on where it goes.

But the way I would look at it is that we are -- if you look at it from a distribution standpoint, we are transforming the ordinary plus excess distribution to more ordinary and less excess. And we are transforming the growth in all the share numbers from growth of earnings, growth of dividend, growth of tangible book value over reduced shares. So we are deploying part of that excess at a return on investment that is substantially higher than our share buyback, hence, the accretion as our share buyback today leads to about a 12% return on investment and both the consolidation are at over 20. So we are converting into ordinary. We're improving the quality, and we're doing that at 8 points over what we would have had as a return on investment from the share buyback.

Incidentally, I'll take this opportunity to confirm one thing I haven't said in my presentation before. The EUR 3.6 billion of 2024 share buyback will now be free to move forward and we'll start as early as possible as we end our results going forward. So this will start and will precede the interims we will pay in the fourth quarter, the dividend interim.

With respect to Commerzbank, the reception of all the authorization that we needed, the last of which we got during the course of Q3, have allowed us to do what we said we would do, which is to transform the total return swaps into underlying shares. The transformation is gradual, and it's gradual because we continue to unwind the positions that we had. Most of the position that we needed to unwind, most of the hedges we had to restructure occurred in Q3. Some of it remains, but it's the minority. And as we unwind and we transform, we increased the level of consolidation.

There is, as you know, a time line or deadline in the authorization we have gotten. And if we do not transform by that deadline, we then loose consolidation, which is why mechanically, we are going to transform the entire position into underlying shares will remain hedged on the downside, might at least expose to the upside of the calls and just exposed to the upside of a stock. That is why we have converted the position in something that can be held for a long time, returning more than share buybacks and benefiting from the delivery of the plan that Commerzbank has has proposed.

In terms of timing, we said, at this point in time, we're just an investor and indeed we are. And we remain that. There is nothing else on the table. We don't exclude that there might be, but for the time being, there is nothing on the table, never has been. And the timing to do that is intellectually until the end of '27, but it very much depends on the posture of our shareholders if they feel that this situation should protract in case there is nothing else happening by '27, then we will protract it.

If they feel they prefer us to unwind and return, then we will unwind and return. As ever, we listen very carefully to our shareholders and we'll do what they feel is better. For the time being, the way I look at it is we have 30% of a net income of Commerzbank accruing to us, fully distributable at a return above 20% that creates, let's say, ordinary distribution going forward at that level, in my opinion, is much better than a share buyback.

The next question is from Antonio Reale of Bank of America.

It's Antonio from Bank of America. I have 2 questions, please, if I may. And my first one is a clarification really, if I may, and apologies if it come across as a bit direct, but it's to do with the Board's decision to withdraw the offer on Banco BPM. You've gone through a lot, and I think your resilience was tested on more than one occasion. I think I can remember at least a few chances where you could have worked. So my question is why now, why after counts of this extension? And I think most importantly, at least to my reading, after the European Commission took a strong stance on your side and pretty much against almost every single condition proposed by the Golden Power Committee. That will be my first question.

And my second question is on use of capital. Now unless we see growth really pick up at this rate, correct me if I'm wrong, but the only way to return this capital in a timely manner is still via M&A. And obviously, that's easier said than done as we've seen, and not just in Italy. So with all the challenges that, you know better than we do, what is, in your opinion, the best way to deploy this capital for a bank like UniCredit? Is it more bolt-on deals? Is it more investments a la Commerzbank? Do you want to focus more on pro factories like you've done on the insurance internalization? Any color you can share here will be much appreciated.

Thank you, Antonio, and we do like direct questions. So direct answer. Why now? Because the situation is not clarifying, and we're very clear. So yes, the EC stance was very welcome and is very clear, and I will not comment further. But if you look at it, even with counts of extension, the situation is such that we will not get clarification of Golden Power within that time line. We will not. If you saw yesterday, even the most recent noise was that the government was working on a new golden power and extending the situation further.

So we were -- we have been from the beginning of April completely stuck in a situation where we cannot engage with shareholders. We cannot review the situation. We cannot explain our position. We cannot run an ordinary orderly OPS project. And this situation does not have a clear deadline on it. It continued to slide. That for us had become a drag. And that is the main reason why we withdrew because the golden power situation is not resolved. Will it be resolved? We sincerely hope so. In the future. When is that future? Beyond the offer deadline even considering the counts of extension. Hence, we pulled.

In addition to all of that, I would add that if you look at the way -- at the value that the transaction was going to provide us and our shareholders, that value had gradually significantly tilted away from us. You know our views on the value distracted by Anima. You know our views on realizing that we needed to do substantial unexpected investments and further provision on BPM to bring them to our standards. You know that until now, we were frozen on our share buybacks of EUR 3.6 billion, and we would have done it after the transaction providing another EUR 800 million of value to BPM shareholders basis value we are detracting from UniCredit shareholders.

And if you continue like that, we risked affecting the entire distribution plan going into fourth quarter as well. So this was a difficult decision, but a right decision for UniCredit and for our value creation. On the side, we hope that the debate between the European Union and all of the national governments leads to a resolution on banking union because Europe needs it. But at this point, we're stepping back on this, we've drawn a line and we move on.

With respect to the use of capital, I wouldn't say the only way to return by '27 is M&A. Let's take it one by one. So today, you're correct. At the end of Q2, we have between EUR 8.5 million and EUR 10 billion of excess capital. It is true. But already, let's call it, by the end of the year for a second, the equivalent pro forma number will probably be between EUR 3.5 billion and EUR 5 billion.

To be honest, if you look EUR 3.5 billion to EUR 5 billion within an over EUR 30 billion distribution, we can very easily top up and some investors would say, well, only another 10% on top. So there is absolutely no issue we're returning it. Obviously, the key topic is what Britta, for example, raised before. Are you going to disinvest from Commerzbank and therefore, have a lot of excess capital coming back in? At this point in time, I answered the question. And in my opinion, what UniCredit is doing is incorporating into ordinary net profit, incorporating into ordinary distribution what was return of excess capital before.

So look at it that way, we will consume 130 basis points of capital by equity consolidating Alpha and Commerzbank. But net of hedges, we will have run rate, EUR 800 million of further revenue; net profit, same number; distribution, same number; growing at the rate that Alpha and Commerzbank net profit will grow. So effectively, this is ordinary distribution but is coming back, but over a perpetuity as opposed to 1 of 3 years. And within that, we have increased the distribution outlook for the next 3 years.

With respect to M&A in general, we keep the same position as always. We are here to create value for all of you. That's what we're here for and do that while we strengthen UniCredit and provide exciting careers to our people and improve our connection with our clients. That's what we're here for. If there is M&A that we feel adds value and accelerate on any of that, we will move. If there isn't, we will not move. I repeat, we're not here and we are not expected and our duty is not to do M&A. Our duty is to create value and strengthen UniCredit. M&A may do that, when we will do it or may not do that, then we will not.

We are present and we continue to be present in 13 countries. There are M&A opportunities in every one of those countries. We monitor them. If they fulfill our guidelines, we will move in. If they don't, we will not. If they fulfill our guidelines and we move in and during their execution, they turn out to be a bad deal for UniCredit, we will pull back. And I think you have seen that in '21, you're now seeing that in '25. And hopefully, next time around, we will do something that will be closed because it will add value to our shareholders. But rest assured that if it doesn't, we will not hesitate one moment to pull back. And I think the entire Board and I are completely united on this front.

Life insurance and other initiatives. So in terms of additional deployment of enough capital, obviously. Life insurance was a big one for us. We took back control of our life insurance in Italy, 100%. This is the fourth largest life insurer and EUR 46 billion of investments, strengthening dramatically our assets under management, under administration, et cetera. So it's very strategic, and we will look for other things like that. The return on this internalization is very high given the Danish compromise.

The deployment of capital within Poland that we expect to contribute between EUR 150 million and EUR 200 million on net profit by '27 is another accelerated organic alternative, and we will continue to do that. We have bolt-on acquisition. You've seen one in Romania. But there are other initiatives.

Now that we have drawn a line on BPM, we're fundamentally free. We don't have any offer in line. Our hands are free. Our Italian business can now fully invest, deploy and aggressively go after for market share because we're not sitting there waiting for what might be. And what the business has demonstrated that they have done in these 6 months, notwithstanding the uncertainty and with the discipline of maintaining profitability-driven lending and business growth will just accelerate going forward, notwithstanding the environment. So I think this is where we are, and that's where we are going forward. But as I said, if tomorrow, there is an opportunity of M&A that is in the best interest of our shareholders and of UniCredit, we will consider it. At this point in time, we do not see any.

The next question is from Andrea Filtri, Mediobanca.

How are the probabilities of Commerzbank and Alpha deals correlated with the withdrawal of the [indiscernible] bid, if at all. And in the Commerzbank letter, you are ruling out a bid. Could you explain us why and what would be the other options? A final one. I'm just going to try that. Any clues on the invisible options?

So I think effectively, what we do with Commerzbank and what we do with Alpha is completely uncorrelated with BPM, 0. The only thing that I could venture is if there was and there wasn't and there isn't an intention to do a deal in the short time by withdrawing BPM, we're not free. Before, we had another deal in flight and another integration in flight. Now we don't. But there isn't anything on the table, and therefore, there is no impact. So that is on BPM.

While -- so with respect to the letter ruling out a deal, et cetera. So we -- notwithstanding all the noise, we continue to be exactly where we said we would be the day after we bought -- we reached 9.9% of Commerzbank, buying a 4.5% stake from the German government. What was that? We said we're going to move to circa 30%. We're going to ask authorizations from all parties, regulators, antitrust, et cetera, to be able to hold the voting shares and equity consolidate. And because of the position, we will remain as an investor. This is where we are. We are at the end of that process. And there is no intention at this point in time to do anything else.

Now separately, if you ask me, and I know you asked me very many times, whether there is value to be created, I strongly believe there is a ton of value to be created, significantly more than what could have been created in Italy. This is a deal that over the last decade has been reviewed and proposed and considered several times. I'll go back and look at the research report or the media because it makes a lot of sense. These are 2 smaller banks that coming together will have a 10% market share or less than 10% in the German market. They would have a 13%, 14% market share combined in Mittelstand. They are very present in segments of the Mittelstand and in geographies that are completely complementary, one to the other. So there is no overlap. There is no blood bath in the network. There is no blood bath commercially. There is just bringing them together and having a stronger competitor.

I also believe it is a good thing for both HVB and Commerzbank. It is a good thing for Germany. I think Europe requires stronger bank to finance investment and to support growth. I think it is good for banking union, but that is my opinion. As of today, we have no dialogue on this topic. We have nothing on the table. I know everybody comments on the merger or the acquisition, but there is nothing to comment on because we have nothing on the table, nor have we ever discussed it because the other side is not ready to discuss it. And therefore, we respect that. We remain an investor. We're very happy to benefit from a return on investment of 20% in our revenue line, getting more stability on the revenue line, getting more ordinary distribution and watch, and stand and be patient and be supportive of anything we can do to accelerate their growth. At this point, our interests are completely aligned.

Invisible options, I don't think they're invisible option. But I would just say that as in anything in life, if 2 parties sit down around the table and want to find solution to situation, most of the cases, they do find that solution, and the solution is usually something that leads to a compromise. If the 2 parties or the 3 parties or the several parties refuse to sit around the table, then there are no options. There is us as the largest shareholder sitting constructively, benefiting from their performance and waiting until our shareholders will tell us that this is not the best option for the use of our capital. But given the numbers, I sincerely doubt that they will tell me that.

The next question is from Ignacio Ulargui of BNP Paribas Exane.

I have 2 questions. I mean one in terms of lending growth. I think, Andre, you have been much more vocal on an acceleration of lending growth and improving outlook in -- especially in Italy. I wanted just to see a bit of whether you see the biggest opportunity in the SME segment in terms of financing, if you see more willingness to have growth in long-term investments in Italy and Germany? Second question is on fee income outlook. I mean, 1Q was very strong, 2Q has been a bit softer. How should we think about the interaction between the insurance business and the fee income in the second half?

Okay. So lending growth, as this is a good point because, as you know, in our plan, so the Phase 2 of UniCredit Unlocked, we were skeptical on the significance of loan growth in Europe. And therefore, our plan was predicated of making the numbers work assuming a faster decline in NII than you're seeing now. We were wrong. I think there is a slightly better loan growth environment overall in our 13 economies than we anticipated. And if you think about us and for a second, we put aside all the noise, we have 16.2% CET1. Nobody has that. We are extremely liquid. Nobody else is as liquid as we are. We have done all of our cleaning, all of our homework in getting our operating machine as efficient as possible. I think very few are in this position.

We're very clear we want to gain market share in SME, particularly small and micro and in affluent and private. And we have put -- rolled out all the levers. And when you want, I can take you through it, country by country, region by region, product by product, channel by channel, all the commercial levers that we need to do to get there. If anything, the BPM deal was constraining us in Italy because there were a number of investments that we wanted to do, that we were holding because you're not going to do those investments if you're acquiring a portfolio on the other side 3 months later, 2 months later, 1 month later. Now we're not constrained. And you should expect us to increase the commercial pressure in Italy meaningfully.

The same thing applies to Germany. Germany at the moment, the situation is stable. We are going to press, and we are going to press because we are there. If you took some of our peers in those markets, especially Italy, you will see peers which have completely destroyed their capital base going below minimum, who are overstretched on their liquidity with loan-to-deposit ratio completely out of whack with the rest of the system that do not have the products, have not invested and that have driven to a wall the commercial effort.

So we hope or we think we're going to gain now in the next 4, 5, 6 quarters, the market share that we deserve to gain, deploying our advantages in these elements. And that applies to the group. Where are we seeing the growth? Well, actually, we are only, let's call it, benefiting because we are focused where we want to grow. So SMEs, private and affluent and in terms of products, we're much more focused, especially in Italy on consumer lending, et cetera.

Fees, as you know, fees are linked to the general environment. So when we had rates going up every single quarter in the last few years, our fees were going well, but they were obfuscated by people being able to get a certain return and by the NII dynamic. Now NII is coming off. And therefore, fees are rebalancing and are increasing their weight.

But it's not a straight line, Ignacio, as you know very well. They move. Why are fees a little bit soft in second quarter? My personal opinion, following reason. Number one, we had an outsized event in Q1. And it's not that outsized plus outsized. If some people accelerate some investment or accelerate some insurance or do some things, then the following quarter, it's softer. We were clearly guiding for that. But that does not mean we are softer for the year. It means there is an anticipation in time line that occurred in Q1, but it's slightly compensated in Q2. Let's see how the end of the year will occur, but we think we are bang online.

The second reason is inevitably all this volatility, all this noise. We have Liberation Day. We have wars. We have volatility. We have all of these things. This is not a conducive environment for people to take decision on investment, to take decision on life or non-life insurance to do a number of things. To take decision on financing. Financing are postponed. Fees on financing are postponed with it. So that's the second reason.

The third reason, which is less important, is especially in payments, last year in Q2, we had significant benefits from our signing a new contract with several providers that gave us incentive. They were booked in Q2. This year, we are not. And secondly, incentive schemes on our payments, especially for retail, used to take place in April and in July. This year, they take place in December. So you have a timing difference. So if you look at all of these things together, as you say correctly, fees were softer in second Q. In second quarter, we are not concerned.

But if the situation, depending on where the geopolitics go and where things go, we may move in our core revenues between NII and fees and back, et cetera. I think that the equity consolidation gives us a stronger bedrock to make sure that the combined core revenues continues to grow and is more insulated than it was before. So that's the way I would look at it. But for the time being, we see the second half being on track. And obviously, from the second half, and you will see it in Q3, we are restating, if you want to call it this way, the way we report insurance because at the moment, we report insurance purely in Italy as fees from distribution.

From next -- from this quarter, we are in, we're going to have an insurance result like some other people have. So in a way, less fees, greater insurance results. On a full year basis, I have a number for '27. So this year is a little bit lower. You're talking EUR 400 million more net revenues by '27 that after cost take a EUR 100 million contribution. So the composition of our revenues will shift from the end of this year onward as we will have a consistent contribution from equity consolidation of about, let's call it, EUR 800 million. And an insurance results, which will be about EUR 400 million plus/minus depending on the year and lesser fees on the other, but the insurance result is going to be greater than -- much greater than what we lose on fees. And that will all go to the bottom line. So I think that, that is what it changes.

But we don't have any other concern with respect to that. But maybe Stefano wants to add something.

Yes. I will give you some data points, Ignacio, in relation to the loan growth. So as you've seen in the quarter, we were up EUR 4 billion on the loan side, around EUR 1 billion each in Italy and Austria and around EUR 3 billion for the Central Eastern Europe. So for the rest of the year, we are expecting to be broadly stable on the loan side in Italy, Germany and Austria, while we are expecting to keep growing in the Central Eastern Europe. With regards to Italy and your question in relation to small, medium enterprises, I mean, so far, we have been doing well in relation, especially to the new productions that is increasing, and we're expecting that this growth will keep on going during the course of '25 and also '26.

On a longer time horizon, meaning if you look '27, right, so the period '26, '27 versus '25, we are expecting on average to have a growth very similar to the nominal rate of the GDP, with Italy, Germany and Austria below the average, right, of nominal rate of the GDP, while Central and Eastern Europe, more than 5%. So you take the GDP of the country where we are, the inflation more or less in Central and Eastern Europe will be there.

In relation to the fees, you need to look to the number with a grain of salt. So we have confirmed for 2025 mid-single-digit growth. Andrea was already commenting on the fact that in the second part of the year, we will add the net insurance result that will be around EUR 140 million to the fees. When you look to the insurance part, bear in mind that -- I mean, we have life and non-life, right? So we are more done on the Life side rather than the non-life. But then if you put together the investment fee trend and the life together, fundamentally, we will be in line with other average of growing at mid-single digit, if you put the 2 together, okay? While on the non-life, we are confirming that we will grow in line or better than the average.

The next question is from Delphine Lee, JPMorgan.

So I've got 2. First of all, on Commerzbank, I just wanted to understand like on your hedging strategy on the color that you have, is the intention to reduce the hedging over time? Or is that not the case because you want to keep your ROI relatively high and you think that it's optimal where it is right now? And second question is just a clarification on Banco BPM. Now that you've dropped the bid, I guess, I mean, I just want to see kind of what's the process here from the government's perspective. I guess there's no need for a decree -- or does the government still need to respond to the EU? And is still there a process there that continues I mean, beyond the time frame of your bid, which has not finished? Or is it just everything is over?

So with respect to Commerzbank, you're asking the intention today. The intention today is we are fully covered on the downside. In fact, the significant strength of the stock over the last 3, 4 months has allowed us to significantly increase the strike on our put option and lock in a greater portion of the capital gain in case we were to get out and which is not the plan at the moment and maintain the capital consumption to what we said we would be. So that comes at a cost, but we think it's the prudent thing to do and the good thing to do. There is absolutely no intention to change that. The future will tell, but for the time being, we're very happy to be, and it gives us a position of extreme strength.

With respect to the coal, obviously, seeing the numbers that you have seen, we have restructured that, and we have -- the lion's share of the calls have been eliminated. So now we are much more, let's say, asymmetric on the upside. The stock goes up, we benefit. The stock goes down, we have kept on the downside. So it's exactly the situation where we wanted to be, and we're happy with that. Obviously, we hope that Commerzbank does well because that will drive results in our direction. We're not anticipating any change to that strategy in the short term. If it were to change, we'll let you know, but nothing else. We've done most of what we needed to do.

With respect to BPM, the process, well, one of the reasons why we pulled is because the process is not clear. We -- if you ask the lawyers, they will tell you we are in a complete uncharted territory. We have, on one side, the Administrative Court of Italy that has done a ruling. Potentially, that ruling requires a redrawing, redrafting of the Golden Power. That ruling is also appealable to the considered stat. So that is one process. Then there is another process. The EU has sent a letter that has become public to the Italian government. And that letter requires a response by the 12th of August. And then following that response, the EU will take a decision on what to do or not to do.

Will this continue as it is now? Honestly, we don't know. We're no longer in the offer. Will the fact that we have had to pull because of that continue the process? Will not. We have no idea. But I do think that in general, for all of us European, having greater clarity of where we stand on these transactions and therefore, having a conclusion to the engagement between the European Union with several countries, among which Italy and Spain is a good thing because it will be giving clarity on what one can do and one cannot do in this environment. But we don't know about the process in detail because this is all new and the intertwining of all of these things is all new. And that's one of the key reasons why we decided not to sit there and wait and draw a line on the BPM.

The next question is from Chris Hallam, Goldman Sachs.

I wanted to come back on the move to equity consolidation of the strategic stakes. If we think about this from a distribution perspective, one way, I guess, to conceptualize the move is that you're swapping excess capital, which could be distributed via irregular distributions into recurring net profit that can be distributed within the regular distribution envelope and you're making that swap obviously at pretty attractive terms. But one question to come out of that is that the distribution of excess capital would have been in part dependent on supervisory approvals. So do you sense any change from the supervisor vis-a-vis their willingness to approve a large excess capital payout? So might that uncertainty be part of the reason one would look to equity consolidate and effectively fully shift that distribution stream into part of the regular recurring payout?

And then as a follow-up, if we start to tie that together, with the attractive ROI of the consolidation moves and considering all the political pushback we've seen to bank consolidation across several European markets, are we getting to a point where banks are becoming more and more incentivized to build up equity stakes and evolve into more complicated cross-holding structures instead of actually executing on transformative M&A?

So first of all, let's put it up fair. Notwithstanding the fact that some of you were concerned with the attention of approval from the regulators in distribution of excess capital above and beyond net profit. We always told you we were not concerned because given our capital level, given our capital generation and given our dialogue with them, we didn't sense any restriction to that. And therefore, we were confident.

Now having said that, we have just -- we have and may continue to convert excess capital distribution into ordinary capital distribution. That means that if some of you had doubts, now the doubts are abating because instead of one-off distribution of, I don't know, let's call it, EUR 8.5 billion, I now have ordinary distribution of additional EUR 1.5 billion, EUR 2 billion a year by the deployment and by the conversion of that excess capital into an equity consolidation or into other bolt-on M&A acquisition like we did on life insurance and other things like that. So the way I look at it is there was no risk. I think the regulator has always been clear. You can afford it. We're going to look at it, you can do it.

Secondly, having said that, we are effectively by transforming excess capital distribution into ordinary income from equity consolidation. We are increasing the ordinary and decreasing the excess. And therefore, we are gaining, let's call it, that we are gaining independence in the way we distribute. And obviously, the dividend part, so the cash part of our distribution is implicitly increasing because the -- our dividend is linked to a 50% payout of our net income of our net profit, if our net profit increases, it increases, while the excess was only in share buyback. So the composition is also moving. So that's the point.

The second point that I would make that you made is if I can deploy my capital, this has always been said, but I do think that the situation has evolved. If I can deploy my capital substantially better than doing my share buyback at a substantially better return than doing my share buyback, then I think my shareholders and you should encourage me to do that. And this is exactly what we are doing. In addition to that, it provides some sort of additional strategic optionality because while we're not counting on it, it is there with a share buyback, it is not. So I think that is the bottom line.

So strengthening our revenues by increasing the component of, let's say, regular recurrent expected core revenue component through the dividend line number one, strengthening our ordering net profit through that, that goes 100% down, strengthening our payout, both in terms of cash dividend and total ordinary payout as expressed as a percentage of total net profit, maintaining, in any case, a buffer from excess capital, but that buffer, call it this way, will be halved after we're done with our equity consolidation at the end of the year. So it's there, but it's halved. And within the magnitude of what now becomes primarily ordinary distribution in the next 3 years, that excess capital is a rounding.

So that is the way we look at it. In addition to that, I would make maybe a more technical comment. It is clear that with ordinary M&A processes being affected in a very significant way by political action because if you look at all the processes, you can look at it in Spain, you can look at it in Italy. What does that happen? They are lengthened, they're uncertain as to outcome, and they create a situation like the one we are today. I'm not saying it's right or wrong, I'm just saying it's a fact. It is true that to a certain extent, banks assuming that they want to do M&A are now pushed and motivated to move into building of stakes because that is something that is still more free.

From a market standpoint, that is not a good outcome, and I totally agree with you, or you don't build stake and you don't do M&A because you don't have control on an orderly offer process. It also changes the dynamic because some targets instead of debating with their shareholders and the shareholders of the bidder, transaction on merit, on value creation, on strategy, et cetera, completely hijack this process by having a political intervention, taking that decision away from shareholders and moving it to those management team and leadership away from the shareholders. Again, as a person who has lived in the U.K., in the U.S. and has a certain point of view, I don't think that this is a good development either. But we are Europeans. This is where we live in. We need to respect it, and we need to do the best within the framework that we have. This is the best that we can do.

The next question is from Hugo Cruz, KBW.

I wanted to ask first about the hedging of the Commerzbank stake. So if I look at 29% of Commerzbank consensus, earnings would be EUR 1.5 billion of earnings, but you're guiding for only above EUR 600 million. So the rest is the cost of the hedging arguably. So that sounds very expensive. So why keep the hedging in place if the stake will be equity accounted and therefore, doesn't need to be mark-to-market anymore? Any room for the hedging to cost to disappear over time. And also, what exactly are you hedging? Is it just the market value of the stake or also the -- your budget for the P&L contribution?

And then a second question on Russia. Almost EUR 500 million of profit in the first half. Can you tell us what your guidance assumes for the full year and for your 2027 ambition?

Okay. So Hugo, I sincerely hope that the 29% CBK -- sorry, but the 29% of the net profit of Commerzbank is EUR 1.5 billion. Sincerely hope -- I really hope you're right. We budget 1. So if it was 1.5, add to our EUR 600 million, EUR 500 million, and it becomes EUR 1.1 billion, okay? Because the hedging cost is the same, but we are budgeting in about EUR 3 billion plus and not anything more. But if it ends up being better, we're very happy about that. And in calculating the return on investment, we are calculating it based on EUR 600 million. If it was EUR 1.5 billion and we end up at EUR 1.1 billion, then our return on investment takes off. This is a demonstration that we are absolutely cheering for Commerzbank to do as best as they can because it will propel us through.

With respect to the hedges, so for the time being, we feel that it is the right thing to do because we're not conclusive also in our chat with our shareholders to maintain downside protection in full. That downside protection in falls allows 2 things. One, it allows to reduce significantly the capital consumption at a cost that is single digits, okay, single-digit cost, so 7%, 8%, 9%. Our share buyback is at 12%. Our return on investment in Commerzbank is over 20%. So it's a very capital returning way to enhance results and be efficient with our capital use. Those are long-dated puts that we have set at a strike that, as I said, has been dramatically increased over Q2, thanks to the performance of the stock, and we anticipate to keep it there.

With respect to the calls that we had stroke at the time of purchasing the stock, we have unwind the lion's share of them, more than the lion's share of them. And those may decline or vest or end by themselves. But the cost you have seen, in part, you haven't seen it, but it existed in Q1 and the one you have clearly seen in Q2 was the unwinding of those as we converted a fully hedged position where we were not benefiting on the upside as much as we wanted to a downside protected position where we have full upside. So again, I repeat, if consensus is right and we got it wrong on the EUR 1.5 billion net income of Commerzbank. That for us is a great outcome. And we will not reduce or change this hedge, we are where we are.

With respect to Russia, I would -- I always warn people to be careful because Russia is lumpy. Where are we making our net profit in Russia from? The more we compress the business, the more we increase the liquidity of our P&L, and we have outsized cash to deposit overnight at the Central Bank. Because of where rates are in Russia and what is being given by the Central Bank overnight and the fact that we are discouraging deposits, we have a very sizable margin on the way we are paid by the Central Bank overnight for our liquidity and where we pay for deposit, but very sizable. That situation is going to end at some point when rates will normalize and they will or when we will continue to compress our deposit out.

And therefore, if you ask me where I think to be by the end of the year, assuming we do not do any protective provision that we often do, we may end up around EUR 600 million or EUR 700 million or we might not. So it's premature to do because every year, we consider and we create further provisions on our position in Russia. I think you should anticipate that whatever is EUR 500 million, EUR 600 million, EUR 700 million, the profit from Russia this year, you should anticipate that by 2027, we will have out of those EUR 100 million, maybe EUR 150 million, maybe less, okay?

So as you look at the numbers between 2025 and 2027, in our number, we are absorbing EUR 500 million to EUR 600 million, maybe even more of compression of contribution with Russia, which we are offsetting with the accelerators, so Romania, Vodeno Aion in Poland and life insurance. But that -- the 2 things tend to offset. And then now we're enhancing with the equity consolidation, okay? That's more or less how you should look at it. So by '27, it may look like we're not progressing a lot, but actually, we are transforming the -- a one-off contribution from Russia to quality earnings from Poland, from Romania, from life insurance and then the equity consolidation of the rest. But my personal opinion is that Russia may well be a lot less than you think for the full year because we always look at it prudently and take provision and protection when we have a particularly strong year.

Next question is from Ignacio Cerezo, UBS.

The first one is on NII. And if you can exclude Russia basically from the commentary. I mean, given your, I mean, seemingly kind of optimism on actually on volumes, given the fact actually our rate seems to be stabilizing around 2% given the fact that you seem to be controlling the spreads quite well. I mean, is it logical to expect some degree of acceleration of NII ex Russia in the second half of the year? Or is it a little bit premature basically and that will happen in the '26 and '27?

And then the second question is on Alpha. I mean your position around Commerzbank, where you are, how patient you want to be, I think, is quite clear already. But direct question again, what is stopping you on actually from taking a bigger position in Alpha and by the entire bank, especially considering the valuation of Greek Banks, if you pay attention basically to what the market is expecting, you're more likely to go up and down basically in coming years?

So let me start with Alpha. Alpha is one of these things that happen without having planned and that turned out to be the best thing that could have happened to you. So we have an outstanding relationship with all levels of Alpha. And when I say management, I think if you took the about 50 to 100 people at UniCredit that are regularly involved with Alpha given that we're doing so many things together not only with our factories, but also in a number of other areas where we're helping them to move forward.

They're all excited to do it. They're not doing it because they're asked. They're doing it because they're enjoying asking it. The same -- and I go to Greece relatively regularly, not as much as I would like, the same happens on the Alpha side. So this is not only a CEO to CEO or Board-to-Board initiative. It is quite granular and the people on both sides are enjoying working together as if Alpha was part of our network. That's the first point.

The second point is, obviously, we've gotten here initially because in order to do Romania, we were encouraged to take a stake. We did it. We didn't expect much from the partnership in Greece. We were wrong. The partnership is outstanding and is progressing on all things. One market, trade finance, payments, corporate lending, where we joined forces to offer a solution to clients on the full requirements, et cetera. So we're happy. And we have been welcomed by an open very market-friendly and very focused on promoting the right kind of investment in the country, government, central bank and institution in Greece. So if you have something like that, Ignacio, the last thing you want to do is put it at risk.

So whatever we will do with Alpha will be something that Alpha wants to do with us. We're very respectful of them. Even the second increase was done because they asked, and we're very happy that they asked, and we did it. But we're not going to move unless we have Alpha feeling that this is a good thing for them. So yes, there will be financial, but this goes well beyond. We really respect the spirit, the partnership and what they've done, and we're standing by this.

Does that exclude that over time, and we have asked for authorization, our stake instead of being circa 20 could be circa 30? Sure. Is there a plan to get there? No. Is there an acceleration to get there? No. But as we need to ask, we're asking for 30, we're not asking for 20. It gives us flexibility in case the need occurs. But there is nothing at the moment beyond the 20 -- circa 20% percentage where we are, and we're going to keep it that way.

And by the way, I do agree with you on the fact that if you look at the underlying economic growth in Greece, the rating of the country, the attitude towards both internal and foreign investments and how they operate, I think there is -- we're very optimistic about the prospects of Greece and the banking sector within it. So we're happy to have a stake. And the rallying of Greek bank have demonstrated that people have realized that, that is the case. I think Alpha is now trading above book value and deservedly so. So I do think that that's where we are on that.

On net interest income, I will pass it to Stefano, but I would say that it is what it is, meaning no acceleration. There are a number of things. Remember, we often forget that if we go back 2 years, we would all have said that with rates reversing 2%, 2.5% back from their peaks, it would have been an Armageddon for banks. Now, we're expecting that we've reached doing exactly that faster in a volatile environment with trade wars, wars, et cetera, et cetera, we're expecting banks to actually accelerate into it. I think, if I may, it's -- we've gone from one extreme to the other. So rates are still coming down. The average rate at which we land lags. So it's not that the rate goes down, I do know very well, by the way. It goes down X and the next day, you have the impact. It lags.

So I would say something different. I would say when we started 2025, we all felt that 2025 was a transition year and then '26 would be more stable. Given all of the dynamics, I think '25 will be better than expected, but some of the tail, we're going to get in '26. It's premature to tell you how much because it depends what happens in '25. But I do think that as the average rate normalizes, as the cost of risk, which as you see is very benign comes up, as inflation continues and people who have not done the work will need to ever suffer that or take restructuring charges to address them, I think '26 is the year where it's going to become more challenging. But for us, we see it as an opportunity to differentiate.

Very clearly, so I'm not misunderstood, but 2025 new guidance reflect all of that. So all of the things that we're seeing, we took into consideration in giving you the new guidance for NII, the confirmation of the guidance on fees, et cetera, et cetera, et cetera. So it doesn't change. The ambition for 2027, the same. As many other banks, we still do not have guidance for '26. The guidance for '26 will be affected by, in my opinion, what happens in the second half of this year. I hope I'm clear on that.

But Stefano, if you want to add.

Yes. So as anticipated by Andrea, there is the rate effect, right? So in Q1, your average was around 2.6. In Q2 was 2.1. What we are expecting is Euribor to go below 2. So our current expectation to go around 1.8. So if you look at the average Euribor for 2025, let's say, will be below 2.1. But then what we are expecting for 2026 or what we are assuming is around 1.8. So consider that our net interest income sensitivity is around EUR 300 million confirm every plus/minus EUR 50 million. So we will still be having the effect deriving from the rate reduction.

Compensated, you are right, from 2 elements. So one is client rate. So client rate, meaning the client spread on the assets we did well, right, especially in Italy. But the volume side, as we have commented more than once, is not going to be sufficient to change the trend, right? So every 1 billion of increased loans for us is around EUR 40 million, right? So it's definitely a different magnitude in comparison with the rate normalization.

So as related by Andrea, confirm the guidance for this year, mid-single-digit reduction. As you've also said, Russia will contribute negative, right? So we were commenting before in relation to the bottom line, but also in relation to the top line, Russia will go down during the course of the second half net interest income included. So in the mid-single-digit reduction, we are also including the lower reduction to the net interest income of Russia perimeter.

So we have come to time on the call. I turn the conference back to the management for any closing remarks.

So as a closing remark, I would say that following. This quarter is full of noise. Our withdrawal from BPM, the restructuring of our hedges on Commerzbank, the internalization of life insurance, the one-off risk and charges anticipated in the future, rates coming down, I would say, faster than we anticipated they would come down at the beginning of the year, volatility from Liberation Day and everything else. But very clearly, the improvement -- the underlying results for Q1 and Q2 are that underlying, and they are stronger than last year as a whole, and in most of the KPI lines.

If you look at our guidance, it's stronger than last year and meaningfully so. And we're very confident we don't raise things if we are not confident we're going to be there or better. That is the underlying business. The contribution from accelerators, which are Romania, Poland and life insurance internalization will not have a meaningful impact this year. So it's still the "old UniCredit." They're going to start contributing positively in '26. The equity consolidation of Alpha and Commerzbank and all the noise that is around it is not having an impact on '26, probably more negative than positive if you take out the one-off, but it will contribute from '26 onwards -- sorry. It will not have an impact this year, '26 onward.

What -- so what we feel very strongly is a stronger-than-expected underlying performance, an accelerating underlying performance, an execution of a second phase of UniCredit Unlocked that is better than we thought, and now a strengthen top line, core revenue line and prospects for our KPIs that have led to the improving performance and in guidance, not only for '25, but for '27. The rest, honestly, is noise, and we will continue to look for opportunities for our shareholders, either by accelerating internally or by finding other opportunities, but we're confident of what we have put on the table and we'll execute in that direction.

With that, I close the call. I thank you all for your time and meet some of you during the road show. Thank you.

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

Good morning, everybody. I'm delighted to be joined on stage by Andrea Orcel, CEO of UniCredit. Really no introduction needed, except I'm pretty confident in saying we're going to have a lot to talk about over the next 35 minutes or so. So we have 35 minutes. We'll try and leave some time at the end for audience Q&A.

I think to begin with, maybe as more of a broader question. You've met a lot of investors recently. I'm sure you're going to meet many more investors today. So before we address specific topics, are there sort of key topics or themes that you think the investor community or the sell-side community, we should bear in mind more for UniCredit and keep foremost in our mind at the moment?

So I think if you look at the performance over the last 4 years, people do talk about transformation, but they do not appreciate how much transformation there has been. We focus primarily on operational efficiency, operational transformation, and we let run the commercial machine just by imposing a discipline in terms of moving the attention from volume to margin from just lending to fees, and we rebuilt a number of things.

So when you look at the results, and everybody says, well, you outperformed the sector, we were 5x net income, 5x return on tangible, 3x the distributions, the other thing that people did not see is that those results were reached despite an increasing amount of investment, front-loaded, despite creating EUR 3 billion more or less of P&L buffers to protect the future and despite rebuilding capital to an excess of EUR 10 billion. So what does that mean? That means that if we had done like the average of the industry, that actually took down to 0 overlays mostly, did not overinvest, did not take the charges to exit people in the last 3 years.

We would have performed a lot better than we have in the last 4 in terms of raw numbers. Those would be the like-for-like. If you take last year, we have been EUR 10.3 billion instead of EUR 9.3 billion. But now we would need to do those things. And we think that the rest of the industry needs to do these things now. You're starting to hear a nonoperating costs to get people exited in Italy, in Germany, in Spain. Well, we've done that. You're starting to hear, we need to invest to rebuild certain factories or fee income. Well, we've done that.

So I do think that as you move in the next 3 years, in our case, not only do we have a transformed bank, and we can focus on the next step of our strategy that we can discuss. But we have not only a buffer below the line that allows us to have great confidence in the delivery of this year net income, next year net income and the EUR 10 billion at the end of the path and to distribute in line with what we have guided, which can well reach EUR 10 billion to EUR 30 billion over 3 years, but we don't need to do other things.

Well, in comparison, our competitors don't have those buffers, and we need to do those things. And as we have said, many people will start saying, oh, but my underlying earnings are EUR 400 million better or EUR 500 million better. Yes, but then our underlying earnings were EUR 1.3 billion better last year and EUR 1.2 billion better the year before that. So I think that, that is not appreciated.

I think on the other hand, there is still an overoptimistic view of the revenue performance of banks in the next 3 years. I mean I think we have started justifying the structural hedges, replication, et cetera, et cetera, et cetera. Let's remember where fees were and that now we're looking at an exit rate of 1.5%, 1.75%, there will be an impact. In our case, that impact is less, one, because below the line, we have EUR 3 billion to play with, and two, because above the line, we have a particularly good dynamic on NII in the next 3 years, not necessarily this year, but realistically, as we continue to move on margin and a good dynamic on fees to compensate that. And Q1 was an indication.

By the way, I think people are getting a little bit over skis on fee dynamics because Q1 was exceptional. Q2 of last year had a significant one-off. So while I'm very confident on what we're going to get this year, I would caution of being overoptimistic on fees and taking Q1 too closely. But that is, I think, the difference.

The other difference is that as we finished Phase 1 of our transformation, which was the operating machine, let's say, we are 70%, 80% there, we continue to prod along. But now we moved on commercial acceleration. What is that? That is bringing to bear the -- all the investments we've done in our factories and really accelerating the tilt towards SME, affluent and private. For us, they're about 60%, 65% of the P&L -- of the revenues, but they are a disproportionate part of our bottom line. Those segments have higher margins. Those segments have not only a higher degree of cross-selling, but higher degree of crossover between them as the owner of a small company is also an affluent client.

And they will allow us to protect not only the NII decline through margin expansion rather than through volume, which seems to be the focus of most, but also to maintain the fee growth as we go into segments that can consume those fees more than we have. So I think all of that for us, if you ask me, what is our degree of confidence to bring the over EUR 9.3 billion this year, reaching EUR 10 billion in 2027, high, why? Because I have EUR 3 billion of buffers, and I have excess capital to play with. And this is at constant perimeter.

What the real question that should be asked is but above the line at the up and up level, can you create a bank that when we are in '28, we'll grow from EUR 10 billion bottom line when your buffers are gone, et cetera, et cetera. And that's our challenge, and that's where we're spending the most of our time.

And you talked about their confidence in delivery, and what gives you the confidence that having had that better-than-expected first quarter to have actually taken a step to raise guidance for the full year? But is there anything given all the macro volatility that we saw post quarter end? I know you referenced fees just now, but anything that you think you need to do different from now on through to the end of the year in order to hit on that...

The short answer is no. And it is no because of what I just said that the buffers, the so-called EUR 1.7 billion of overlays and EUR 1.3 billion of nonoperating charges that we have in the P&L, we're in a way built so that we wouldn't need to deviate on our strategy and on our execution because of short-term accidents or the question is how much of those buffers do I need to use to get to my end game. But because Q1 was -- let's forget for a second trading, which was exceptional, but also does highlight that we can crystallize value when there is volatility.

We actually were well above our plan because the NII plus fees was positive. When you combine that with cost down, cost of risk linearly flat, then our NOP and GOP were positive. We had guided NOP and GOP down on Q1, Q2, Q3, Q4, compensated in Q4 by nonoperating charges. Instead, now we have a Q1 with NOP and GOP up and up even more because of the impact on trading.

So when you get to Q2 and the guidance that we gave, where we said, okay, if we are capable of reducing the negative on NOP and GOP in Q2, or to go flat year-on-year, then our ability to exceed our plan beyond the EUR 9.3 billion becomes greater, as we are not touching any of those or don't need any of those buffers at the end of the year to compensate for the first half. So that's why we said, let us see how we close Q2, let us see how Q3 begins. But if the momentum is the one that we're seeing, I think we will have upside this year.

Okay. And before we, I think, dive into M&A and distribution, just one more topic on performance. You've clearly -- you and the team have articulated a strategy focused around organic capital generation, a fairly distinctive approach to NII and fees, some of which you touched on. But maybe if you could just run us through more on the medium term, the future strategy on NII and fees? And then how you think on those -- the coming 3 years, as you referenced earlier, that's going to sustain the momentum on NIM fees that we've already seen?

So we have said that many times, and I know that the industry looks at it a little bit differently. But -- so for us, EUR 1 billion in volume on lending at constant margin, heroic assumption, if volumes are going down for the market, EUR 15 million of increased revenues. 1 basis point of margin decline, EUR 45 million of decline. So what should you focus on? And the EUR 1 billion of volume in lending brings capital, uses capital, and therefore, reduce your capital generation. The 1 basis point in margin does not.

So because of that, our focus has been, yes, we want to grow, but we want to grow in a way that at minimum does not compromise margin. At best, in the past 4 years, we've been able to increase this margin. If you look at our revenue over RWA dynamic, that's exactly what we have done, recognizing that this is what generates not only net income but actually profitability and capital generation. So if you take that, we have gone from being well below the cost of equity on NII RoAC, which nobody looks at, but you need to look at as a stand-alone, if you're a commercial bank, your lending business. Is that profitable? Or is that not profitable?

Most banks say it's all the client relationship. Well, I've been in investment banking, you lend to get fees. When the fees don't come, then it is not a good picture, right? So the same happens here. So we want to have a lending business, but watch his fees. At the end of Q1, the NII RoAC without anything else was 20% return on equity. Now it will decline, but we are now very confident that it will decline still keeping a buffer above the -- our cost of equity. Why? One, because of our starting point; two, because of our discipline and focus on that rather than volume.

And three, because as we move towards SME and affluent and private, margins are greater. So we are offsetting some of the compression through the shift in clients and everything else. That's the commercial shift that we are doing. And so that does not mean not growing. It does mean growing credibly. And if you look at it, even in Q1, we had guided more conservatively on NII dynamics. We're actually beating the industry on NII dynamics because we're growing margin, they're growing volume still. So this will continue and is the first pillar of our commercial effort.

The second pillar is the fees. Given that, I think that regulation will continue to compress returns in lending for banks. In my opinion, we're not done. Below the line, benchmarking, review of models, et cetera, et cetera, will continue to take away profitability or return on capital in lending, you need to increase your fee base, which actually is -- does not absorb any capital. So we've gone from about 22% of revenues in fees to 36% last quarter. We're going to 40%, and we're well diversified, so we're less volatile there.

We rally less because we're not only investments, but we are much more stable because we are much more diversified. And I think, as we do that, again, client segments and products, I think that allows for our core revenue line to have a dynamic that is positive. But it will have a setback in '25, and it will have a setback in the first half of '26 as rates compress.

Let's remember that banks when rates were negative, did not have this profitability. So if we are capable over '25 and '26 on the compressional rate to not only not ditch down on the record profitability of '24, but actually add to it, and then when the environment is normalized, grow from there, then you have a little bit redefined the rules in at least European banking, and you can offer an investment opportunity that I think is quite attractive for investor in banks in Europe, and that's what we are trying to do.

And then considering all of those comments, I guess when you take a step back, can you confirm then the current view for 2027 in terms of net profit return, capital distribution, et cetera?

I think the end game of reaching EUR 10 billion at current perimeter. So if we -- or when we consolidate Alpha, Commerzbank or if we were to do any M&A, that's all out. That you should consider it as incremental. If we take the perimeter of today, which does include the internalization of insurance, for instance, and does include the consolidation of Alpha Romania, for instance. If you take that perimeter, we will make EUR 10 billion or EUR 10 billion plus by '27. I'm confident. And we will make them at a return on equity in the high teens and probably at 20%. That, we will.

The returns -- the capital return, we're talking stand-alone status quo, well, we haven't reviewed because we need to assess a little bit the more volatile part of our excess capital, which is the part that is linked to the contribution of a strategic portfolio. Things go up, things also go down. Russia, things go up, things also go down. But the EUR 7.5 billion excess are going to allow us to say that we can distribute without a doubt what we committed to distribute unless there is a very, very negative development because whatever happens, I can modulate, first of all, the release of buffer to get the net income. And then from that net income, if it's not enough, I can modulate the distributions by accelerating or decelerating the amount of excess that I give back.

So the path to 2027, I think highly confident. But as I say, the question for everybody is when we are going to be sitting some point in '27, what is the perspective for '28, '29 and '30. And for us, we need to be able to articulate that the level of transformation and change allows us to say, we will grow more than the industry, top line, bottom line, et cetera, without relying on any buffer, on any excess capital, on anything else. And that's where we need to get.

And then on M&A, you've reiterated on many occasions that you've got inorganic opportunities across your 13 markets or so. And you'll only close on deals that demonstrate real value creation to you and meet those financial criteria that you have. Can you help us understand how this applies to some of your recent potential moves of Commerzbank, Bank of BPM. And ultimately, for you, what is the upside more broadly given the proven strength as you just outlined of the stand-alone franchise?

Well, I think -- look, I think we all say, yes, it makes sense, but then we forget about that. M&A is a tool. It's not an objective, and we all say, yes, that makes a lot of sense. But then once you are in an M&A transaction, everybody wants to see are you going to close it, are you going to close it, are you going to close it. Let's remember, it's a tool. It's a tool towards what, towards 2 objectives, strengthening the group end, and the end is in block capital letters, increasing value creation.

So if that objective is not achieved, then you need to have a discipline to step back. In addition to that, if you have a base case where you've done your work and you have a lot of buffers, and I do believe that our base case is at the top tier, if not at the top of the industry in terms of what we can deliver at our current valuation, then why would I dilute that or endanger that for an M&A that doesn't add value? Because remember that if we do an M&A, integration means the normal running of the company gets set back. People cannot do 5 things at the same time.

So the point is we have a great base case. We're making a lot of value. We are very confident. We are also very confident that there will be positive dispersion between us and the peer group when they do their homework. So if the target does not allow us to at least exceed by a small delta, what the base case allows us to achieve, we won't do it, and you should not want us to do it. So if we look at those cases, the first comment that I would make, but this is a more general comment, bank M&A, we'll see if in other industries it's the same, has now gotten another constituency. And those are government and politicians. And I'm not criticizing, it's a fact.

So when you do bank M&A, you need to take that into consideration. We always take that into consideration. But now it's not only moral situation, it's not only we need to have a dialogue, it becomes binary, digital. If they block you, they block you.

Second thing that needs to be considered in M&A in Europe at the moment in banks is a question that I will ask the audience. If management teams instead of maximizing the value for their shareholders and potentially giving opportunity to clients and their people, et cetera, believe that because they don't like a transaction, they can go and lobby to a government or to a politician and block it, is that good? In my opinion, given our view of life, it's not. And that is no criticism on government or on politicians, but it is a criticism on using this angle as a defense strategy because that prevents the market from functioning correctly and brings the whole dialogue somewhere else. And it is not factual, it is not rational, it is not value-creating, it is just defense for pure defense. And this is happening everywhere at the moment, everywhere. There is no exception, okay?

And I've always thought that management teams are here to not to own the bank, but to do the best by what their shareholders and their people have asked them to do. If you move that on saying, "Well, I know better, and because I don't like it, I'm going to block all of that. And I have my own agenda". I don't think that that's all right, my personal view. But that is now a factor.

And if that factor drags and makes it even more difficult or less economical to the deals, then we need to be in a position to pull back. So if you take BPM, there is a lot of noise, but the noise always gravitates on the same thing. The elements in the golden power are not -- are actually things that if I were a government mostly, I would take Russia out of there, I would worry about. So I'm not concerned about that. But if it is not exactly clear what they mean, once we close the transaction, we will have the risk of a EUR 20 billion penalty if what we have in our mind in terms of what they mean is in disagreement with what the Ministry of Finance really feels what they mean. That is not a risk any shareholders should want me to take.

So explain to me exactly what you mean. So if I am told cease activities in Russia, we have effectively ceased all of our lending activity in Russia since 2022, ceased. We have EUR 800 million or EUR 900 million of lending left, and it depletes. I'm sorry, guys, if I have a mortgage of 20 years, I cannot accelerate more than that. We're down 85%, 90%. I think that's good enough.

We have ceased all the payments effectively, different from euros and dollars. And we went from EUR 25 billion a quarter to now we're going to trend at EUR 6 billion a quarter. And incidentally, even the golden power is indicating that those payments I need to keep going because companies in Germany, in Italy, in France who are still operating there need it. And because -- let's talk about the ugly truths, we still buy energy, we still buy commodities, we still buy things from Russia. And that is allowed. And so how will government-controlled company even pay for that if there is no payment system. So that's why it's always excluded.

Then you are left with cross-border. We're down 95%. We have a loan repaying -- or not repaying. In October, we will be down 100%. We have ceased activity since 2022. Then we have deposits. But I'm sorry, people, if we are doing payments, we have deposits on one hand and on the other. We have less than EUR 1 billion of deposits, they are declining. Under Russian law, we're obliged to take this deposit. So is that cease of activity and is those deposit linked to payments excluded from the golden power or including the golden power? Well, we'll tell you later.

Well, later, if we disagree, there is a EUR 20 billion fine. So as I see it now, if a golden power is not clarified, by the way, I'm not saying change, everybody takes change and some people say, oh, the medicine, there is no medicine because do we agree that we want to increase, not only maintain, but increase the lending to SMEs in Italy? Yes, it's in our strategy. Do we agree that we will continue to manage Anima in the best interest of savers? Yes, we always do that. Do we have a problem with maintaining EUR 1.5 billion of project finance in Italy? None.

But clarify me Russia and -- deposit to loan ratio, well, as you all know, if I have a meltdown in the economy, deposits increase because they come out of asset management, they go there, lending decrease and nobody wants to borrow. What do I do then with the deposit to loan ratio? So it's a question of definition. It's not a question of content. If the definition is correct, for me, the golden power is absolutely acceptable. But if it is not clear, and if it's not correct, then the probabilities that we take that risk is zero, and therefore, we will pull.

So at this point, you should consider that if the Golden Power is not in some form -- shape or form clarified, we will pull. Why did we ask for suspension, extension, et cetera? Because we believe that we agree on the content. We are trying to have a dialogue to clarify and still have the time to run an offer at the back end because as you can see, we have not even started running enough. BPM has defended. We have not even started. We are 1.5 months late. So we need time if we want to educate shareholders on that.

But at the moment, given how I see, probability, 20% or less so linked on the digital whether government clarifies or doesn't clarify those topics. On Commerzbank, we talk -- I think we talk a lot about M&A on Commerzbank. At the moment, we have a 30% stake, that's it. We haven't made an offer because we're unwelcome. We are exactly where we said we would be in December. Where are we? We raised our stake to 10%. By the way, I would like to underscore participating as the only invited institutional or institutional strategy, call it whatever, but the Ministry of Finance of Germany, in their sell-down of a stake, we were the only bank invited because we had been talking to them for a long, long time.

We signed an NDA in the morning. The whole market came in the evening. We were asked to increase our offer to get that stake because the placement did not go well. And if you go and look at the statements from the Ministry of Finance, that's what they said. During the whole process, we were in complete contact with the then leadership of Commerzbank, until that time was favorable to us moving in that direction. So I still don't understand this business of opaque, hostile or anything else because if you sell me something and you turn around and you say it's opaque and hostile, I don't get it.

But that said, from then, we said very clearly, we will ask for authorization to go to 30%. We did. We moved to 30%. And probably by the end of this month, we will have all the authorizations to be at 30% because we still have a lot of derivatives. We only have in physical the 10%. When we get there, and during the summer, we'll need to take a decision whether we consolidate the 30%, yes or no. We'll see. If we consolidate the 30%, meaning we take the physical on the 30%, it means fact, we will have a 30% stake; fact, that 30% stake comes with rights and influence; fact, I have a duty to my shareholders to protect that investment.

So the only way this moves in any direction, and the direction may be up, maybe down, maybe a compromise of any sort, is with dialogue. If no one wants to talk, then we are going to have a situation where we are stalling for a long period of time. And I don't think that is in the best interest of Germany, in the best interest of Commerzbank and not for us. We have earned the right to be patient. We're going to sit it out, have the 30%, exert the power that goes with it and wait and see what happens until my shareholder tells me, you know what, at this level, I think you should either launch, exit or do something else. But we have taken until '27, so we have a long time to do that.

Okay. One last quick question for me before we turn to audience Q&A, I'm sure we'll have many. We're here in Berlin. We just talked about Germany. You have a EUR 5 billion revenue bank here in Germany. How do you see the outlook for that business specifically in Germany? And how do you think the fiscal plan will benefit that business, but then maybe also the European franchise more broadly?

So we are -- I think I'm actually quite proud and thankful to the team here because when I arrived at UniCredit, I had a long line of people telling me, Germany, you're never going to be able to make money out of that country, sell it. We closed Q1 with a 26% return on equity at 30% CET1 with a 36% cost-income ratio, and both were improving still. The bank is very capitalized, very liquid, very clean, complete, the most advanced in the transformation in the group and ready to take opportunities. So from that standpoint, very positive.

By the way, because you asked and it is connected, as we sit it out, look at the Q1 performance of UniCredit Germany versus Commerzbank, net income plus 12%, net income at Commerzbank minus 2%, minus 4% if you eliminate the release of overlay. We increased the difference in cost-income ratio to 20 points. We are at 36%, we're at 56%. We increased the difference in return on equity to 26% versus 14%. So in my view, the 2% are not trajectory. You should expect Commerzbank to converge if you're doing their plan not to diverge because we're ahead, our margin to increase further is limited, their margin to increase further is varied by cost. Ours in Germany, minus 2%. There's plus 7%.

If there is no revenue, we're going to see where that takes them. In the short term, can play with margins because of our deposit base, but let's see where it gets them in 2, 3, 4 quarters. So that's where we are.

As we said, Germany this year -- well, last year, slight negative growth; this year, very lackluster growth. But next year, big bounce. And following year, big bounce. And so for us, and I've been sharing HVB since '21, big opportunity. Big opportunity. I strongly believe in the country, strongly believe in the Mittelstand, strongly believe in the new plan of investment that tries to find growth and transform a number of things in Germany that needs transforming. And I think with HVB, we are right at the heart of that.

Few people know that we are -- we keep on winning #1 bank for trade finance again and again and again. We have been the #1 bank in defense again and again and again, and we're positioned in the regions where there will be -- so for example, most of the innovation budget is going to touch that area, we are there. So we are very positive on what we can do out of this economy and supporting this economy in '26 and '27.

This year, still tough. This year, still tough because you get the compression of rates and all the investment that we are expecting are not being rolled out. I mean, when you get such amount, you need to prepare how you're going to roll them out, the infrastructure, who's going to do what, et cetera. That takes time. Once you start rolling them out, in which form, guarantees with lending of bank attached, they are buying, I don't think anymore, but American planes or European planes, but depending on that, the role of bank is more or less. But without a doubt, we think big rebound on economy and even better rebound on banks.

Okay. With that, any questions from the audience? No, we're good. Okay. Maybe just 1 sort of final wrap-up for me. I know we're running out of time. We talk about returns durability. I mean we talked about earlier in some of your confidence in delivery. There has been a focus on this organic capital generation, as you talked about earlier, you talked about the higher returns outlook, high teens, et cetera. Do you think that's fully appreciated when you look at the conversations you have with investors today, I guess, in recent weeks, that there is confidence that you can consistently perform at that level?

Well, I do think that people use a lot of proxies -- or let's go back if -- at least in my time, there was a great article on the FT on nobody cares about numbers anymore, which I suggest people read because it is true. In my time, how do you value a company? Cash flow generation. Healthy company can generate cash recurrently in a growing pattern over time, and that's where you want to be as a shareholder. Now, for a bank, that is not cash flow, that is dividend. Why? Because the restriction on distribution, the capital, et cetera, is dividend, but it's the same concept. So at the end of the day, a bank should be valued on its ability to distribute, how much do you distribute on a consistent basis and is that amount growing or not growing.

So what is the proxy that is being taken? Net income. Well, it's a proxy that may or may not work. There are banks that are capital heavy and that lend by volume that cannot distribute more than, say, 40%, 50% of their net income without decreasing their capital. Yes, but they've decreased this capital, that's not sustainable. You can do it 1 year, 2 years, 3 years, but then the capital will be decreasing. And then you go back to 40%, 50%, okay?

But there are banks, one of our greatest competitors, which has been my benchmark in Italy, they are capable because they are much more capital light to distribute 80% and not then fair capital. Which of the 2 models is worth more money? In my opinion, the second one, okay? So you can have 2 banks that both make EUR 10 billion in net profit, but one can safely distribute recurrently EUR 5 billion, and the other one, EUR 8 billion. I'll take the EUR 8 billion. But people don't make that distinction. That's the first problem.

The second issue is the mixing between the return of excess capital in the ordinary, okay? We separate the 2. Organic capital generation should be I make a profit and without considering the return of excess capital, how much can I distribute without denting my CET1. That for me is the core. And you want to have that number. By the way, when you are in a normalized state, that number by definition is below net income. So all the banks that distribute at or above can do that for a time because they are using excess to do it. If I make EUR 10 billion, it is not possible that I generate capital for EUR 11 billion unless I'm doing some extraordinary stuff, which occur.

In the case of UniCredit, we've been generating 120%, 130% and distributing 95%, 100%, and therefore, that's where we are, 16.1% of capital, okay? But over time, all the efficiency measures, all the things finish because you're efficient. Then you go and you distribute a subset of the EUR 10 billion for us of net income. The question is when you get there, how much. So the question is, when you get there, how high is your EUR 10 billion? Is it EUR 10 billion? Is it EUR 11 billion? Is it EUR 12 billion? Or is it EUR 9 billion? Because it's a portion of that.

And second, how much of that EUR 10 billion can you distribute without denting your capital? And so we are trying to move those 2. If you go by volume only, you could, let's say, get to EUR 11 billion, but then you can distribute 50%. Maybe if you go by margin, you get to EUR 10 billion or EUR 10.5 billion, but you can distribute 85%. And I think the second one is much more recurrent, and in time, we will -- we are a yield industry. You're not going to buy me for extraordinary growth. Last 4 years, maybe. But over time, we are boring, increasing. Yes, but boring sometimes is good in fact. Boring increasing element of the portfolio, but gives you a secure, growing dividend yield, et cetera. That's what we are, okay? That's what this industry is now.

And I think if we can get something that where your net income grows at a return on tangible, but in the high teens, it means it is a profitable growth. And because it is combined with capital light, it allows you to ordinarily distribute 80%, 90% -- 75%, 80%, 90%. Well, then you have the best on EPS growth and the best on distribution growth and the best on how much of that net income you're distributing at. By definition, that bank is worth more. As of today, nobody is making that distinction.

And therefore, if you have banks that have released overlay and paid back some of the excess capital to support their distributions, they are viewed exactly the same to other banks who have not distributed their overlays and who have not distributed their excess capital. Actually, in our case, we shouldn't have, but we have. We have increased our excess capital. So by definition, we have more capacity. And I think that's the question.

So when I talk a lot about after 2027, EUR 10 billion net profit, high teens return on tangible and growing from there, I'm trying to bring you to your proxy, but in my mind is not that, in my mind is what will be the organic capital generation and my ability to distribute consistently from 2027 and beyond. Is that number EUR 9 billion growing because I don't have any extraordinary, is that number EUR 9-plus billion growing? Or is that number EUR 8 billion, EUR 7 billion? It won't be. But is my -- the more I am close to the net income trajectory, the better, I think, over time, people will appreciate because at some point, they will see the difference in EPS growth -- in the EPS growth, in distribution, return, et cetera. So that at the end of the day, from a financial standpoint, that what we're doing. Industrial is different. But the objective is that the industrial converts into this.

Okay. Look, great. I think we could go on and on, but in the interest of time, we have to stop somewhere. So thank you so much for giving us some of your time today and really appreciate you coming.

Thank you.