Q2 2026 Banca Sistema SpA Earnings Call

August 6, 2026

Speaker #4: Ooh, sometimes. It's a broken heart that decide. Ooh, sometimes. The truth is harder than the pain inside. Yeah. Ooh, sometimes. It's a broken heart that decide.

Speaker #4: Ooh, sometimes. The truth is harder than the pain inside. Ooh, sometimes. It's a broken heart that.

Speaker #1: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca Sistema first half 2026 results conference call. As a reminder, all participants are in listen-only mode, and after the presentation, there will be an opportunity to ask questions.

Operator 7: Good afternoon. This is the Chorus Call conference operator. Welcome, thank you for joining the Banca Sistema H1 2026 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Christian Carrese, Head of Investor Relations. Please go ahead, sir.

Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, thank you for joining the Banca Sistema H1 2026 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Christian Carrese, Head of Investor Relations. Please go ahead, sir.

Speaker #1: Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Christian Carese, Head of Investor Officer.

Speaker #1: Please go ahead, sir.

Speaker #2: Hey, good afternoon. Thank you very much for joining the First Half 2026 conference call of Banca Sistema. Before starting the call, the conference, I would like to remind you that all the press release presentation and analyst kit can be found in the website of Banca Sistema, www.bancasistema.it, in the Investor Relations section and results.

Christian Carrese: Hey, good afternoon. Thank you very much for joining the first half 2026 conference call of Banca Sistema. Before starting the call, the conference, I would like to remind you that all the press release presentation, analyst kit can be found in the website of Banca Sistema, www.bancasistema.it, in the Investor Relations section and results. Now I hand over the call to the CEO of Banca Sistema, Mr. Iacopo De Francisco.

Speaker #2: So now I hand over the call to the CEO of Banca Sistema, Mr. Jacopo De Francesco.

Speaker #3: Thank you, Christian. First of all, good evening to everyone, and thank you for joining on August the 6th at 5 o'clock. So thank you for being here now.

Iacopo De Francisco: Thank you, Christian. First of all, good evening to everyone, and thank you for joining on 6 August at 5:00 PM. Thank you for being here now. Let me start with the headline. This is the quarter where the integration stopped being a plan on a PowerPoint page and became a running business. The mandatory tender offer is closed. KK, Kruso Kapital, has been deconsolidated, and both boards have approved the reverse merger. We are on schedule and in some respects we are ahead of it. Today what I want to give you is a couple of things, a couple of messages. First of all, I want to give you a clean read of where the numbers stand. Second, I would like to give you a clear view of where this platform is going.

Speaker #3: So let me start with the headline. This is the quarter where the integration stopped being a plan on a PowerPoint page, and became a running business.

Speaker #3: So the mandatory tender offer is closed. KK, so Crusoe Capital, has been deconsolidated, and both boards have approved a reverse merger. So we are on schedule, and in some respects, we are ahead of it.

Speaker #3: So today, what I want to give you is a couple of things, a couple of messages. First of all, I want to, let's say, give you a clean read of where the numbers stand.

Speaker #3: And second, I would like to give you a clear view of where this platform is going. Both the reported figures and the adjusted figures will be very helpful to give you a sense of where we stand and where we are going.

Iacopo De Francisco: Both the reported figures and adjusted figures will be very helpful to give you a sense of where we stand and where we are going. One very important point, one additional remark is the following. A clarification on the perimeter, because it's not the same on the consolidation perimeter. It's not the same if you look at the balance sheet or if you look at the P&L, because on the P&L side, Q1 includes Banca CF+ only, and Q2 includes Banca CF+ and Banca Sistema, but not Kruso Kapital that has been deconsolidated. On the balance sheet side, Q1 includes Banca CF+, Banca Sistema, and Kruso Kapital, while Q2 does not include Kruso Kapital. This is very important because we have a moving perimeter, and the perimeter will change.

Speaker #3: One very important point, one additional remark, is the following. A clarification on the perimeter, because it's not the same on the consolidation perimeter. I mean, it's not the same if you look at the balance sheet or if you look at the P&L.

Speaker #3: Because on the P&L side, Q1 includes CF Plus only, and Q2 includes CF Plus and Banca Sistema, but not Crusoe Capital that has been deconsolidated.

Speaker #3: On the balance sheet side, Q1 includes CF Plus Sistema and Crusoe Capital, while Q2 does not include Crusoe Capital. So this is very important because we have a moving perimeter, and the perimeter will change.

Speaker #3: So it is very important that we are able to give you the sense of what is happening on our numbers, both P&L and both balance sheet, and Christian will be at your disposal to, let's say, clarify your doubts regarding our consolidated numbers.

Iacopo De Francisco: It is very important that we are able to give you the sense of what is happening on our numbers, both P&L and both balance sheet, and Christian Carrese will be at your disposal to clarify your doubts regarding our consolidated numbers. Let's go to page two of the presentation on the integration process. This slide gives you a very clear evidence of where we stand. Let me work through it, because execution is the story in this quarter. On 15 June, the mandatory tender offer closed. Banca CF+ stake in Banca Sistema is 85.6%. On the 22, we completed the translisting of KK, and deferred consideration was paid. Kruso Kapital stake at the time was reduced to a little bit less than 5% and has been deconsolidated.

Speaker #3: So first of all, let's go to page two of the presentation. So on the integration process. This slide gives you a very clear evidence of where we stand.

Speaker #3: So let me walk through it, because execution is the story in this quarter. So on June 15, the mandatory tender offer closed. CF Plus stayed in Sistema is 85.6%.

Speaker #3: On the 22nd, we completed the translisting of KK. And the first consideration was paid. So Crusoe Capital stayed at the time was reduced to a little bit less than 5% and has been deconsolidated.

Speaker #3: If I have to give you the number of our participation in Crusoe Capital as of now, we are roughly above 2%. So we sold also a small remaining part, and our target is to completely reduce to zero our participation.

Iacopo De Francisco: If I have to give you the number of our participation in Kruso Kapital, as of now, we are roughly above 2%. We sold also a small remaining part, and our target is to completely reduce to zero our participation. On 24 June, Banca Sistema and Banca CF+ boards approved the reverse merger and exchange ratio. By September, we expect the authorization of Banca d'Italia on the reverse merger. By mid-November, the legal and IT immigration, on top of all the operational merger will be complete, and by year-end, we present the new business plan. Every milestone here on this slide, either we hit it or we are on track to hit it. Page three. Last time, I brought you through our three key measurement priorities this year. I would like to give you a sense of where we stand on each of these points.

Speaker #3: On the 24th of June, Sistema and CF Plus boards approved a reverse merger, and the exchange ratio. By September, we expect the authorization of Bank of Italy on the reverse merger.

Speaker #3: By mid-November, the legal and IT immigration on top of all the operational merger will be complete. And by year-end, we will present the new business plan.

Speaker #3: So every milestone here on this slide either we hit it or we are on track to hit it. Page three. Last time, I brought you through our three key management priorities this year.

Speaker #3: And I would like to give you a sense of where we stand on each of these points. So first of all, I already mentioned the industrial integration.

Iacopo De Francisco: First of all, I already mentioned the industrial integration, OPA is completed. KK has been deconsolidated both in terms of legal, organizational, and IT merger, and synergies, we are, let's say, fully on track and we confirm the timing. On our second priorities, I called that last time, stabilize NHS and PA Factoring and roll out a new normal operating model. What we will describe in detail today to you is that the assurance on the operational compliance to the new Definition of Default regulation and on credit and collection processes (you remember that was asked in relation to the inspection that Banca Sistema had in 2024, so was asked by the regulator) has been completed. We give you a sense of where we stand, what we have found, what are the financial impact of what are the findings. Back book. We told you that we were studying securitization.

Speaker #3: OPA is completed. KK has been deconsolidated, both in terms of legal organization and IT merger and synergies. We are fully on track, and we confirm the timing.

Speaker #3: On our second priorities, I call that last time stabilize NHS and PA factoring and roll out a new normal operating model what we will describe in details today to you is that the assurance on the operational compliance to the new definition of default regulation and on credit and collection processes, you remember that was asked in relation to the inspection that Banca Sistema had in 2024, so it was asked by the regulator, has been completed.

Speaker #3: And I will give you a sense of where we stand, what we have found, and what are the financial impact of what are the findings.

Speaker #3: Backbook. We sold. We told you that we were studying securitization. We were studying a disposal of the past due backbook in first half results.

Iacopo De Francisco: We were studying a disposal of the past due back book. In H1 results, you don't see yet those evidences, the impact of what we have done, what we achieved. Actually, this does not happen in H1 results because we submitted to Banca d'Italia an SRT authorization, so we show up all the full numbers when Banca d'Italia will complete its authorization process. We will give you now a sense of where we stand and what we have done. We are keep on working on the front book. On number 3, lay the foundations to unlock the platform's full potential. This is where our energy is shifting now. Here, we completely closed the securitization programs on Tax Credit. We reclassified the securities portfolio in Banca Sistema from held to collect and sell to held to collect.

Speaker #3: You don't see yet those evidences, the impact of what we have done, what we achieved. We got actually this is does not happen in first half results because we submitted to Bank of Italy an SRT authorization.

Speaker #3: So we show up all the full numbers when Bank of Italy will complete its authorization process. We will give you now a sense of where we stand and what we have done.

Speaker #3: We are keep on working on the front book. On number three, so lay the foundations to unlock the platform full potential. This is where our energy is shifting now.

Speaker #3: And here, we completely closed the securitization programs on tax credits. We reclassified securities portfolio in Banca Sistema from health to collect and sell to health to collect.

Speaker #3: On all the other points, so Spain, JV, new business line, reviewing football securitization, and the security back loan sorry, salary back loan business, we are fully on track.

Iacopo De Francisco: On all the other points, Spain JV, new business line, review football securitization, and the Salary-Backed Loan business, we are fully on track. One important point on the new business line, we already hired a new desk, a new team that will be active on structure and acquisition financing. Let's go ahead on page 4. This is something that you well know. I will be quick on the mechanics. The voluntary offer closed in March, after the reopening period. After the voluntary offer, we were at 80%. After the mandatory offer, we are at 85.67%. On 22 June, KK deconsolidation happened. This situation altogether, the 85%, the deconsolidation, and so on and so forth, does have impact on the capital position.

Speaker #3: One important point on the new business line, we already hired a new desk, a new team that will be active on structure and acquisition financing.

Speaker #3: Let's go ahead on page four. This is something that you well know. I will be quick on the mechanics. The voluntary offer closed in March.

Speaker #3: After the reopening period, and now we are as CF Plus at sorry, after the voluntary offer, we were at 80%. After the mandatory offer, we are at 85.67%.

Speaker #3: Now, on the 22nd of June, KK deconsolidation happened. This situation altogether, so the 85%, the deconsolidation, and so on and so forth, does have impact on the capital position.

Speaker #3: One important point is that actually we were putting in our pen the deconsolidation of Crusoe in September. From a formal point of view, this happened before happened in June.

Iacopo De Francisco: One important point is that actually we were putting in our plan the deconsolidation of Kruso in September. From a formal point of view, this happened before, it happened in June. What I want to highlight is that our capital position will be additionally improved by the fact that the credit line, it is still present in Banca CF+ related to Kruso, most of it will be closed by September, and therefore there will be an additional release of capital related to the fact that Kruso will have a securitization instead of the credit line from Banca Sistema. On page 5, the assurance. This is the review that we anticipated, and it's complete. Let me give you the outcome directly area by area. First point, we verified the application of the new Definition of Default rules, materiality threshold, mitigant adoption.

Speaker #3: But what I want to highlight is that our capital position will be additionally improved by the fact that the credit line that is still present in CF Plus related to Crusoe—most of it will be closed by September.

Speaker #3: And therefore, there will be an additional release of capital related to the fact that Crusoe will have a securitization instead of the credit line from Banca Sistema.

Speaker #3: On page five, the assurance. So this is the review that we anticipated, and it's been and it's complete. Let me give you the outcome directly area by area.

Speaker #3: So first point, we verified the application of the new definition of default rules, so materiality threshold, meeting and adoption, we verified all the positions that were that have active mitigant.

Iacopo De Francisco: We verified all the positions that would have active mitigants. We verified all the IT and relevant systems in place. Let's say what we have found, and that has an impact of EUR 40 million in terms of additional past due, so it has been a new reclassification, is related to the materiality threshold formula that has been aligned to the latest, let's say, regulation, and this is the impact that it has been already taken into consideration in H1 results. We went through all the allocation of collection procedure, IT, operational processes, organization, and so on, so forth, and there is no material findings that we identified. Sorry. We reviewed Tax Credit and factoring litigation and the negative rulings. With the negative rulings, the result has been an additional risk and charge position of EUR 5 million. The fourth area was the analysis of the resolution.

Speaker #3: We and we verified all the IT and relevant systems in place. The say what we have found, and that has an impact of 40 million in terms of additional past due.

Speaker #3: So it's been a new reclassification. Is related to the materiality threshold formula. That has been aligned to the latest let's say regulation and this is the impact that it's been already taken into consideration in half year results.

Speaker #3: Then we went through all the allocation of collection procedure, IT, operational processes, organization, and so on and so forth. And there is no material findings that we identified.

Speaker #3: Then sorry. We reviewed tax credit and factoring litigation and the negative rulings. With the negative rulings, the result has been an additional risk and charge position in of 5 million.

Speaker #3: And the fourth area was the analysis of the resolution, where we assessed the classification and valuation needs. We have found that the legal construct is fully valid.

Iacopo De Francisco: Where we assessed the classification and valuation needs, we have found that the legal construct is fully valid. In terms of additional, let's say, impairment, we put EUR 6.9 million additional impairment. The overall assurance that we completed on what are the critical areas regarding the application of DOD in Banca Sistema related to 2024 Banca d'Italia inspection, have an impact of EUR 40 million of additional past due, and EUR 11.9 million of impairment. Let's go to another important point. In July, the beginning of July, Banca Sistema signed a securitization of NPEs related to public administration exposure and submitted SRT findings to Banca d'Italia. We are waiting for the authorization, once it lands, we will give you full details of the capital and P&L effect. What I want to give you a sense of what is that and how it works.

Speaker #3: And in terms of additional, let's say, impairment, we put 6.9 million additional impairment. So the overall assurance that we completed on the what are the critical areas regarding the application of DOD in Banca Sistema related to 2024, Bank of Italy inspection, have an impact of 40 million of additional past due.

Speaker #3: And €11.9 million of impairment. Let's go to another important point. In July, at the beginning of July, let's say, Banca Sistema signed a securitization of NPEs related to public administration exposure and submitted SRT findings to the Bank of Italy.

Speaker #3: We are awaiting for the authorization. And once it lands, we'll give you full details of the capital and P&L efforts. So what I want to give you a sense of what is that and how it works.

Speaker #3: First of all, we are talking about €115 million transferred to the SPV, and in line with the net book value. Three rated tranches by Moody's.

Iacopo De Francisco: First of all, we are talking about EUR 115 million transferred to the SPV, in line with the net book value. Three rated tranches by Moody's. You see here what has been the effort done by Moody's, what is the rating on the senior note, what is the rating on the mezzanine, and then we have a junior note. We signed with a third-party investor binding agreements related the sale of the mezzanine and the junior note. The very important point here is that the price at which the transaction will be completed, once Banca d'Italia will authorize through the SRT the sale, is aligned to our net book value. It does not have economic impact from that point of view. One important point here is that clearly you can understand that there will be a positive impact in terms of capital release.

Speaker #3: So you see here what has been the effort done by Moody's; what is the rating on the senior note, and what is the rating on the mezzanine.

Speaker #3: And then we have a junior note, we signed with a third-party investor binding agreements related the sale of the mezzanine and the junior note.

Speaker #3: The very important point here is that the price at which the transaction will be completed, once Bank of Italy will authorize through the SRT the sale, is aligned to our net book value.

Speaker #3: So it does not have economic impact from that point of view. One important point here is that clearly you can understand that there will be a positive impact in terms of capital release.

Speaker #3: The senior will be held on our books. The senior risk-rated asset is 70—sorry, density is 78%. So, the impact that you see on this page comes from the overall reduction of exposure that will go out.

Iacopo De Francisco: The senior will be hold on our books. The senior risk-weighted asset, sorry, density is 78%, the impact that you see on this page comes from the overall reduction of exposure that will go out. On the other side, the fact that we will keep the senior at a 78% density on our book. Clearly, all these effects and the validity of this transaction is subject to Banca d'Italia authorization. Let's go on page seven. Now let's talk about the business itself, starting with volumes, because this is the number I care about most in this moment here. New volumes were up 36% year-on-year, to EUR 3.8 billion. That tells that the capital constraint that, as I mentioned last time, historically limited the commercial potential of Banca Sistema is gone. The bank was never short on demand, but it was short on capital.

Speaker #3: On the other side, the fact that we will keep the senior at a 78% density on our book. Clearly, all these effects and the validity of these transaction is subject to Bank of Italy authorization.

Speaker #3: Let's go on page seven. So now let's talk about the business itself. Starting with volumes, because this is the number I care about most in this moment here.

Speaker #3: So new volumes were up 36% year on year. So to 3.8 billion. That tells that the capital constraint that as I mentioned last time historically limited the commercial potential of Banca Sistema is gone.

Speaker #3: So the bank was never short on demand. But it was short on capital. You see here some evidences, factoring is up 29%. NHS and PA is up 65%.

Iacopo De Francisco: You see here some evidence. Factoring is up 29%, NHS in PA is up 65%, corporate is up 13%. Tax Credit is up 70%, while financing, that you will remember, is mostly related to guaranteed financing is down 44%. What is very important, let's remember, we are talking about aggregated data. We are talking about the fact that we are putting together Banca Sistema, Banca CF+, along with different business lines we have seen last time. In the next pages also, we'll show you details on the business lines performance. On the balance sheet, loans to customers are up 3% to EUR 4.3 billion, and core funding is up 4% to EUR 5.7 billion. The funding base is growing in step with the asset side, so that's a discipline that we want to see. Page eight. This is the consolidated H1 2026 performance composition.

Speaker #3: Corporate is up 13%. Tax credit is up 70%, while financing—which you will remember is mostly related to guaranteed financing—is down 44%. Now, what is very important: let’s remember we are talking about aggregated data.

Speaker #3: We are talking about the fact that we are putting together Banca Sistema and CF Plus along a different business line that we have seen last time.

Speaker #3: And in the next pages also I will show you details on the business lines performance. On the balance sheet, loans to customers are up 3% to 4.3 billion and core funding is up 4% to 5.7 billion.

Speaker #3: The funding base is growing in step with the asset side. So that's a discipline that we want to see. Page eight. So this is the consolidated first half 26 performance composition.

Speaker #3: So I'm going back to the consolidation perimeter. So to the clarification that I gave you at the beginning as an introduction to this numbers.

Iacopo De Francisco: I'm going back to the consolidation perimeter, so to the clarification that I gave you at the beginning as an introduction to these numbers. Here we are seeing the P&L. That means that H1 results include two quarters of Banca CF+ and one quarter of Banca Sistema. What you see here in terms of profit before tax is an overall result of EUR 91 million, which is influenced by extraordinary items in a range of EUR 75 million and a profit before tax adjusted of EUR 16 million. First of all, let me start from the extraordinary items, because the size of the impact of these items is very relevant. First of all, the badwill is in a range of EUR 96.6 million. We have, as we mentioned already, EUR 11.9 million of one-off loan loss provision related to the assurance that I just described.

Speaker #3: So here we are seeing the P&L. So that means that half year results include two quarters of Banca CF Plus and one quarter of Banca Sistema.

Speaker #3: What you see here in terms of profit before tax is an overall result of 91 million, which is influenced by extraordinary items in a range of 75 million and a profit before tax adjusted of 16 million.

Speaker #3: First of all, let me start from the extraordinary items because the size of the impact of these items is very relevant. First of all, the bad release in a range of 96.6 million.

Speaker #3: Then we have as we mentioned already 11.9 million of one of loan loss provision related to the assurance that I just described. We have as of today 10.9 million of integration and transaction cost.

Iacopo De Francisco: We have, as of today, EUR 10.9 million of integration and transaction cost, and then we have other residual impacts. What does this mean? That overall, the extraordinary items have a weight of EUR 75.3 million out of EUR 91.4, say, million of profit before tax. The ordinary results, let me call or the adjusted result, is EUR 16 million. Let me point one element here. On the badwill, it is real, it is IFRS compliance. It arose because we acquired Sistema below the net asset value. It won't repeat. We are not leaning on it as operating performance. What is very relevant, if you go to the next slide, is that we are trying to give you also a sense of how the operating performance is moving.

Speaker #3: And then we have other residual impacts. So what does this mean? That overall the extraordinary items have a weight of 75.3 million out of 91.4 let's say million of profit before tax.

Speaker #3: The ordinary let's say the ordinary results let me call order the adjusted results is 16 million. Let me point one element here. On the bad will it is real it is IFRS compliance.

Speaker #3: It arose because we acquired Sistema below the net asset value. It won't repeat. We are not leaning on it as operating performance. So what is very relevant if you go to the next slide is that we are trying to give you also a sense of how the operating performance is moving.

Speaker #3: In fact, from the 16 million of profit before tax adjusted for the extraordinary items, what we have we are showing you here in the second column what we call here aggregating first half 26 results which is pointing at 22.3 million of adjust of adjusted.

Iacopo De Francisco: In fact, from the EUR 16 million of profit before tax adjusted for the extraordinary items, what we are showing you here in the second column, what we call here aggregating H1 2026 results, which is pointing at EUR 22.3 million of adjusted, relates to the fact that in this column, what we did is including also the first quarter results of Banca Sistema, always without including KK. KK is excluded from these numbers. It's been excluded also from the first quarter of Banca Sistema. This column that points at EUR 22.3 million, is a sort of, let's say, aggregated, consolidated results under the assumption that the consolidation would have happened including Banca Sistema and not Kruso since the beginning of the year. This number is relevant. Sorry, I'm pointing a lot.

Speaker #3: Relates to the fact that in this column what we did is including also the first quarter result of Banca Sistema. Always without including KK.

Speaker #3: So KK is excluded from this numbers. So it's been excluded also from the first quarter of Banca Sistema. So this column that points at 22.3 million say aggregated consolidated results under the assumption that the consolidation would have happened including Banca Sistema and not Crusoe since the beginning of the year.

Speaker #3: This is relevant this number is relevant sorry I'm pointing a lot I'm spending time to give you the sense of the numbers because 2026 will be an year where many extraordinary items many extraordinary situation will happen where many one off will be let's say put into the numbers and where the consolidation perimeter will change.

Iacopo De Francisco: I'm spending time to give you the sense of the numbers because 2026 will be a year where many extraordinary items, many extraordinary situation will happen, where many one-off will be, let's say, put into the numbers and where the consolidation perimeter will change. It is very important that you try to follow us step by step in how the numbers create and what is the meaning of the number. If we take this EUR 22.3 million and we compare, let's go to the next page. To the same number in H1 2025. This is the slide I'd like you to focus on. On an aggregated basis, net banking income of EUR 285.5 million compared to last year, EUR 86.4. Net revenues in a range of EUR 76.5 million compared to EUR 67.9 million in H1 2025.

Speaker #3: So it is very important that you try to follow up follow us step by step in how the numbers create and what is the meaning of the number.

Speaker #3: So if we take this 22.3 million and we compare let's go to the next page. To the same number in first year sorry first half 25 this is the slide I I I'd like you to focus on.

Speaker #3: So on an aggregated basis net banking income of 85.5 million compared to last year 86.4. Net revenues in a range of 76.5 million compared to 67.9 million in first first half 25.

Speaker #3: The overall cost already started going down and we have a profit before tax tax adjusted that this year is 22.3 million as we already have seen while last year on on a peer to peer basis was 13 million.

Iacopo De Francisco: They were all costs already started going down, we have a profit before tax adjusted that this year is EUR 22.3 million, as we already have seen, while last year on a peer to peer basis was EUR 13 million. This is the result, this is the comparison that is showing how, let's say, this year compares to last year. Okay, page 10. Last time we introduced the point of unit economics. The way from a managerial point of view, we look at our businesses, the way we analyze businesses, the way we analyze their performance. It is a process ongoing where we are, let's say, week by week, improving the methodology, aligning the methodology. We are not yet there. One important point I would like to underline here is that both cost of funding and operating expenses allocation methodologies are still under review.

Speaker #3: So this is the result. This is the comparison that is showing how let's say this year compares to last year. Okay. Page 10. Last time we introduced the point of unit economics.

Speaker #3: So the way from a managerial point of view we look at our businesses the way we analyze businesses the the way we analyze their performance.

Speaker #3: So it is a process ongoing. We where we are let's say I'll say week by week improving the methodology aligning the methodology. We are not yet there.

Speaker #3: One important let's say point I would like to underline here is that both cost of funding and operating expenses allocation methodologies are still under review.

Speaker #3: So I will mention, let's say, clearly where especially cost allocation might have, let's say, significant impact. But if you look at first-half results, first of all, we are presenting here our six business lines.

Iacopo De Francisco: I will mention, let's say, clearly where especially cost allocation might have, let's say, a significant impact. If you look at H1 results, first of all, we are presenting here our 6 business lines, where one of those is in run-off, which is our legacy business, deriving from Banca CF+. Then we have Factoring NHS, we have Factoring Corporate, we have Tax Credit, we have Financing, we have Salary-Backed Loan, we have the Legacy Business. Now, if we start from the return indicator that as of now we are showing to you, which is not our final, let's say, KPI, that will be a pure ROAC, including therefore also the costs and so on and so forth.

Speaker #3: We are one of those is in runoff which is our legacy business deriving from CF Plus. Then we have factoring NHS. We have factoring corporate.

Speaker #3: We have tax credit. We have financing. We have salary back loan and we have the legacy business. Now if we start from the return indicator that as of now we are showing to you which is not our final let's say KPI that will be a pure RORAC including therefore also the costs and so on so forth.

Speaker #3: We are in front of different businesses which range from a return of 148% in tax to a return of 4 6% in terms of factoring NHS and corporate down to 2% in in salary back loan and 3% on the legacy business.

Iacopo De Francisco: We are in front of different businesses, which range from a return of 148% in Tax Credit to a return of 46% in terms of Factoring NHS and Factoring Corporate, down to 2% in Salary-Backed Loan and 3% on the Legacy Business. In terms of contribution, you see here overall, let's say net revenues contribution, you see here that Factoring Corporate and Tax Credit all together have a weight of more than half of our revenues. Then we have Factoring NHS NPA. I want to underline a point that I already made very clear last time. The overall NHS NPA activity has a limited, let's say, weight in terms of exposure. Out of, let's say, an overall balance sheet of more than EUR 6 billion of assets, Factoring NHS NPA has a weight of something in a range of EUR 500 to 600 million. That is the weight.

Speaker #3: In terms of contribution, you see here overall—let's say net revenues contribution—you see here that factoring, corporate, and tax credit all together have a weight of more than half of our revenues. Then we have factoring NHS and PA.

Speaker #3: I want to to underline a point that I already made made very clear last time so the overall NHS and PA activity has a limited let's say weight in terms of exposure out of let's say an overall balance sheet of more than 6 billion of assets factoring NHS and PA has a weight of something in a range of 500 to 600 million.

Speaker #3: So that is the weight still it has an important contribution to net revenues. Let me say that once we allocate cap sorry costs operating expenses properly the salary back loan business will will go negative.

Iacopo De Francisco: Still it has an important contribution to net revenues. Let me say that once we allocate costs, operating expenses properly, the Salary-Backed Loan business will go negative, while all the other businesses will remain significantly positive. As we mentioned, we are reviewing our position and our strategic, let's say, attitude towards Salary-Backed Loan business. Okay. Here we are showing, again, let's say data regarding to the group. What is relevant here is that our net NPE ratio in the period grew from 9.4% to 11%. This is related to the fact that, as we mentioned, from one side, we have done this important reclassification related to the assurance process that we put in place. I underline that this assurance process introduced an updated methodology for the past due definition, specifically as far as concern the LPI inclusion.

Speaker #3: While all the other businesses will remain significantly positive. As we mentioned we are reviewing our position and our strategic let's say attitude towards salary back loan business.

Speaker #3: Okay. Here we are showing again let's say data regarding to the group. What is relevant here is that the our net NP ratio in the period grew from 9.4% to 11%.

Speaker #3: This is related to the fact that as we mentioned we from one side we have done this important reclassification related to the assurance process that we put we put in place.

Speaker #3: I I I underline that this assurance process introduced an updated methodology for the past few definition specifically as far as concern the LPI inclusion.

Speaker #3: The second point that I want to highlight here is what we call the net NP ratio post-guarantee. As you well know, relevant exposure in CF Plus is related to guaranteed financing.

Iacopo De Francisco: One second point that I want to highlight here is what we call the net NPE ratio post guarantee. You well know that a relevant exposure in CF Plus is related to guaranteed financing, where on average, we do have a guarantee in a range of 75% of the overall exposure. That means that, as an additional point also relevant for you, is that as of now, considering all the situation in which we went back to SACE or MCC asking for the guarantee payment, we did have 100% hit ratio. That means that we collected everything we asked on that. Excluding the guaranteed portion, the NPE ratio goes down, is 7.4% in Q1 and is 9% in Q2. The coverage, the NPE coverage, goes up to 32%. Cost of risk on a recurring basis is 43 basis points.

Speaker #3: Where on average we do have a guarantee in a range of 75% of the overall exposure. So that means that as and an additional point also relevant for for for you is that as of now considering all the situation in which we get we we went back to such or MCC asking for the guarantee payment we did have a 100% hit ratio.

Speaker #3: That means that we we collected everything we asked on that. So excluding the guaranteed portion the the NP ratio goes down is is 7 7.4% in the first quarter and is 9% in the second quarter.

Speaker #3: The coverage the MP coverage goes up to 32%. Cost to risk on a recurring basis is 43 basis point. Recurring means that we have not included into these numbers the 11.9 one off provision that we booked in first half related to the assurance process.

Iacopo De Francisco: Recurring means that we have not included into these numbers the EUR 11.9 million one-off provision that we booked in H1 related to the assurance process. Okay. I will now leave immediately to Ilaria for the following page. On this page, what I want to highlight here is that, first point, in terms of past due, if you consider the position in Q1 2025, it was EUR 333 million. It went down in Q1 2026 to EUR 199 million, and now as a consequence of H1 2026 reclassification related to the assurance, we are up to EUR 249 million. One important point is that the ongoing securitization is expected to remove EUR 98 million of past due loans.

Speaker #3: Okay. I will now leave immediately to to Ilaria for the following page. On this page what I want to highlight here is that is that first point in terms of past due if you if you consider the position in in first quarter 25 it was 333 million.

Speaker #3: It went down in first quarter 26 to 199 and now as a as a consequence of first half 26 reclassification related to the assurance we are up to 249.

Speaker #3: One important point is that the ongoing securitization is expected to remove 98 million of past due loans. So that means that if I consider for a second if I make the assumption that Bank of Italy will approve an SRT will be will be given we you should consider in your in your number a reduced number in terms of past due of 98 million.

Iacopo De Francisco: That means that if I consider for a second, if I make the assumption that Banca d'Italia will approve and SRT will be given, you should consider in your number a reduced number in terms of past due of EUR 98 million. Let's go to the next page. Risk-weighted assets. Sorry, Ilaria, I made a mistake on the page. In terms of risk-weighted asset, we are at EUR 2.5 billion. In terms of density, you see here that the legacy has 100% risk-weight density. We are moving from very low density businesses, like Tax Credit, to businesses where we are in a range of 20% to 30%, like financing a Salary-Backed Loan. If you look at factoring, clearly, we do have the Corporate, which is at 68%, while the NHS NPE segment, if you put together the performing exposure together with the past due, on average, we stayed at 84%.

Speaker #3: Let's go to the next page. Risqued assets. Sorry Ilaria I I I made a mistake on the page. In terms of risqued asset we are at 2.5 billion.

Speaker #3: In terms of density you see here that the legacy has an 100% risk weight density. Then we are moving from very low density businesses like tax credit to businesses where we are in a range of 20 30% like financing and salary back loan.

Speaker #3: If you look at factoring clearly we do have the corporate which is at 68% while the NHS and PA segment if you put together the exposure of the the performing exposure together with the past due on average we stayed at 84%.

Speaker #3: If you look at how risqued asset are present you see that out of 1.889 billion in terms of risqued asset related to loans to customers we have 800 million related to fa corporate factoring exposure 463 related to NHS and PA and 262 related to legacy.

Iacopo De Francisco: If you look at how risk-weighted assets are present, you see that out of EUR 1.889 billion in terms of risk-weighted asset related to loans to customers, we have EUR 800 million related to Factoring Corporate exposure, EUR 463 related to NHS NPA, and EUR 262 related to legacy. This is very important to allocate how our capital is allocated, where we want to allocate looking forward our capital, and what are the businesses that do have a higher performance than others. Let's go ahead. Capital ratios. We are at 11%. We were at 11.4%. In here, you see a mix of effect. You have +40 basis point due to the deconsolidation of KK.

Speaker #3: So this is very important to allocate how our capital is allocated. Where we want to allocate looking forward our capital and what are the businesses that do have a a higher performance than others.

Speaker #3: Let's go ahead. Capital ratios. We are at 11%. We were at 11.4%. In here you see a a mix of effect. So you have plus 40 basis point due to the deconsolidation of KK.

Speaker #3: You have more or less 55 basis point related to the completion of the assurance process. And you have a reduction of 20 basis point they're having from a mixed effect of the increased take acquired and PPA adjustments.

Iacopo De Francisco: You have more or less 55 basis point related to the completion of the assurance process. You have a reduction of 20 basis point deriving from a mixed effect of the increased stake acquired and PPA adjustments. One important point I want to highlight is that related to the deconsolidation of KK, this number, this 40 bps impact, is a sort of partial initial effect of the deconsolidation. As I told you at the beginning, as of now, we do have still a credit line, which has an impact of roughly EUR 90 million of risk-weighted asset, and that will be reduced by September. Credit line versus KK. Next page. That's it. Okay. Well. I now leaving the space for Q&A, operator, you can take control.

Speaker #3: One important point I want to highlight is that related to the deconsolidation of KK these number is a sort of this 40 bips impact is a is a sort of partial initial effect of the deconsolidation.

Speaker #3: Because as I told you at the beginning as of now we do have still a credit line which has an impact of roughly 90 million of risqued asset and that will be reduced by September.

Speaker #3: Credit line versus KK. Next page. That's it. Okay. Well so I now leaving the space for Q&A. So operator you can take control.

Speaker #1: Thank you. This is the Colosco conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone.

Operator 7: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. First question is from Irene Rossetto, Banca Akros.

Operator: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. First question is from Irene Rossetto, Banca Akros.

Speaker #1: To remove yourself from the question queue please press star and two. First question is from Irene Rossetto Banca Acros.

Speaker #2: Yes. Hello to everyone. Three questions from my from my side. So first of all regarding the securitization just a confirmation if I understood correctly the transaction did not result in any loss for the bank and you have already identify a buyer for the mezzanine and the junior franchise.

Irene Rossetto: Yes. Hello to everyone. Three questions from my side. First of all, regarding the securitization, just a confirmation. If I understood correctly, the transaction did not result in any loss for the bank, you have already identified a buyer for the mezzanine and the junior tranches. Is that correct? On factoring volumes, they showed a very positive trend in the quarter. Was this also driven by the temporary absence of a securitization, or does it only reflect a genuine commercial momentum? Lastly, where do you expect the common equity to our ratio to settle once the merger and the SRT transaction are fully completed? Thank you.

Speaker #2: Is that correct? Then on factoring volumes they showed a very positive trend in the quarter. Was this all so driven by the temporary absence of a securitization or does it only reflect genuine commercial momentum?

Speaker #2: And lastly, what do you expect the common equity ratio to settle at once the merger and the SRT transaction are fully completed? Thank you.

Speaker #3: Okay. Let's go to the let's start from the securitization. I will say that we have more than identified a buyer in the sense that we signed binding agreements binding contracts with the buyer.

Iacopo De Francisco: Okay. Let's start from the securitization. I would say that we have more than identified a buyer in the sense that we signed binding agreements, binding contracts with the buyer. It is more than having identified somebody, an investor, but it's that we do have already binding contracts signed with this investor. Let me also make one important point that I think that is helpful to you to understand what are the impacts of a securitization like this. First of all, you are correct. If I sell, as we did, at the same price of our net book value, I do have nil, zero economic impact. Second, in terms of capital impact, clearly, I have some exposure that have 150% risk-weighting that are exiting the bank.

Speaker #3: So it is more than having identified somebody an investor but it's it's that we do have already binding contracts signed with this investor. Let me also make one important point that I think that is is helpful to you to understand how what are the impacts of a securitization securitization like this.

Speaker #3: First of all you are correct if I sell as we did at the same value I do have Neil so zero economic impact. Second in terms of capital impact clearly I have some exposure that have a 150% risk weighted that are exiting the bank.

Speaker #3: On the other side on the other side I I will keep on my book the senior note which as we said has a risk weighting of 78%.

Iacopo De Francisco: I will keep on my book the senior note, which as we said, has a risk weighting of 78%. There are other, let's say, impacts that we should consider looking at securitization. The first one is that we do have some positive impact on the reduction of the forward calendar provisioning. Second impact is that I do have some revenues that likely in the next year will not be present because I'm selling exposures. A bank exposure provides some earnings, I do have to consider that one. The third element, which by the way, is already incorporated in the impact in terms of basis point, is the fact that once that we sell this type of exposure, the sale has some impact on our accrual models.

Speaker #3: Then there are other, let’s say, impacts that we should consider when looking at securitization. The first one is that we do have some positive impact on the reduction of the forward calendar provisioning.

Speaker #3: Second impact is that I do have some revenues that likely in the next year will will will not be present you know a bank exposure provides some earnings and so I do have to consider that one.

Speaker #3: And the third element which by the way is already incorporated in the impact in terms of basis point is the fact that once that we sell this type of exposure the sale has some impact on our accrual models.

Iacopo De Francisco: This has a negative impact immediately in the moment in which we will account for it, as it is only a financial impact, a fair value impact, looking forward in the next years, I will recover that. All these elements are elements that we have to consider in order to appropriately look at a securitization. I confirm that if I put together price and BVE, the economic impact is zero, and in terms of capital release, is the impact that we highlighted in the presentation, which already incorporates the impact on the accrual models. Now, let me say one important point. All these numbers, the effectiveness of the transaction is subject to Bank of Italy authorization on SRT.

Speaker #3: This has a negative impact immediately, in the moment in which we will account for it, but then, as it is only a financial impact—a fair value impact—looking forward in the next years I will recover that.

Speaker #3: So, all these elements are elements that we have to consider in order to appropriately look at a securitization. I confirm that if I put together price and BV, the economic impact is zero, and in terms of capital release, it is the impact that we highlighted in the presentation, which already incorporates the impact on the accrual models.

Speaker #3: Now let me say one important point. All these numbers the effectiveness of the of the transaction is subject to bank of Italy authorization on SRT.

Speaker #3: As the the matter is relevant and as we signed the binding agreement at the beginning of July with the investor and the rate and the moodies went public on the rating we consider appropriate to start giving you a sense of and a direction of these important action that we put in place.

Iacopo De Francisco: The matter is relevant, and as we signed the binding agreement at the beginning of July with the investor, and Moody's went public on the rating, we consider appropriate to start giving you a sense of, and a direction of this important action that we put in place. On factoring, it's not related to securitization. It's related to the fact that, for instance, on a quarterly basis, due to capital limitation, Banca Sistema historically, for instance, was reselling to other factors, specific exposure in order to match capital requirements. This is something that is not happening anymore. Additionally, as you saw on page three in the presentation, we already closed the securitization program on tax. That means that volumes that before were somehow shared in a securitization with other investors are 100% remaining on our book.

Speaker #3: Then on factoring it's not related to it's not related to securitization it's related to the fact that for instance on a quarterly basis due to capital limitation Banca Sistema historically for instance was reselling to other factors specific exposure in order to match capital requirements.

Speaker #3: This is something that is not happening anymore. Additionally as you see as you saw on page three in the presentation we already closed the securitization program on tax therefore that means that volumes that before was somehow shared in a in a securitization with other investor are 100% remaining on our book.

Speaker #3: Let's also say that we are putting together in terms of this number CF plus and Banca Sistema. So we are not only in front of Banca Sistema results but in we are in front of Banca Sistema and CF plus commercial activity commercial productivity and CF plus on a standalone basis is is also having very good results especially on factoring and on sorry and on tax.

Iacopo De Francisco: Let's also say that we are putting together, in terms of this number, Banca CF+ and Banca Sistema. So we are not only in front of Banca Sistema results, but we are in front of Banca Sistema and Banca CF+ commercial activity, commercial productivity, and Banca CF+ on a standalone basis is also having very good results, especially on factoring and on Tax Credit. A great result, I would say. The financing business is a business that, as you well understand, which was mainly focused on guaranteed lending, is a business where we suffer the fact that during Q1, the SACE guarantee scheme was not yet, let's say, made available to operator in the market. So we had a Q1, which was very slow in terms of productiveness. What was the last question?

Speaker #3: Great result I will say. The financing business is a business that as you well understand which was mainly focused on guaranteed lending is a business where we suffer the fact that during first quarter the such guarantee scheme was not yet let's say made available to operator in the market and so we had a first quarter which was very slow in terms of productiveness.

Speaker #3: What was the last question?

Irene Rossetto: Yes, sorry. On the capital.

Speaker #2: Yes. Sorry. On the cap.

Iacopo De Francisco: Sorry. Yes. On the capital, we do expect, considering the merger, considering, let's say, the full effect of KK and other effects, we are expecting a CET1 ratio by the end of the year at 12%, 12.2%.

Speaker #3: Sorry. Yes. Yes. On the capital we do expect considering the merger considering let's say the the full effect of KK and other effects we are expecting a CT1 ratio by the end of the year at 12% 12.2%.

Speaker #2: Thank you very much.

Irene Rossetto: Thank you very much.

Speaker #3: Okay.

Iacopo De Francisco: Okay.

Speaker #2: Next question is from Lorenzo Giacometti, Intermonte.

Operator 7: Next question is from Lorenzo Giacometti, Intermonte.

Operator: Next question is from Lorenzo Giacometti, Intermonte.

Speaker #4: Yes. Good afternoon. Thank you for taking my questions and thank you for the presentation which I mean very helpful to better understand the new the new group.

Lorenzo Giacometti: Yes, good afternoon. Thank you for taking my questions, and thank you for the presentation, which I find very helpful to better understand the new group. I have a few questions. The first one is about the cleanup. I mean, now that the assurance exercise is complete with the EUR 40 million exposure reclassified to past due, and the almost EUR 12 million of charges booked. Do you expect the cleanup to be finished as of now? What kind of normalized cost of risk shall we assume for the H2 of 2026? The second one is on the integration cost. Basically, if you can give us some color about potential integration cost also on the H2 of 2026. Thank you.

Speaker #4: So yep a few questions. The first one is about the the cleanup and I mean now that the assurance exercise is complete with. The the 40 million exposure reclassified to post due and the almost 12 million of charges booked do you expect the the cleanup I mean to be to be finished as of now and what what kind of normalized cost of risk shall we assume shall we assume for the second half of 2026 and the second one is on the integration cost so basically if you can give us some color about potential integration cost on the also on the second half 2026.

Speaker #4: Thank you.

Speaker #3: Okay. Sorry. You you mentioned so these two are the questions or you were saying either more question because I understood more question than two.

Iacopo De Francisco: Okay. Sorry. These two are the questions, or you were saying either more question? Because I understood more question than two.

Speaker #4: Oh, no, no—just these two. Thank you.

Lorenzo Giacometti: Oh, no. Just these two. Thank you.

Speaker #3: Okay, I will say on integration cost, let me say that I went through the assumptions that you have made in your recent report.

Iacopo De Francisco: Okay. I would say on integration cost, let me say that I went through the assumption that you have made in your recent report. I will say that you could keep that specific number as a reference number. In terms of cleanup, the assurance was an important activity that was asked to us that somehow was related to the inspection that Banca d'Italia ran on Banca Sistema in 2024, related to the new definition of default application, classification, and provision related to the past due. As the PA exposure was the largest source of potential risk within Banca Sistema, we started this assurance. By the way, was also, let's say, strongly asked by the regulator, and we completed that. It was an assurance on the procedures, the policies, the IT, the organization, and on the numbers, clearly.

Speaker #3: So I will say that you could keep that specific number as a reference number. Then in terms of cleanup the assurance was an important activity that was asked to us that somehow was related to the inspection that Bank of Italy run on Banca Sistema in 2024 related to the new definition of default application classification and provision related to the past due.

Speaker #3: So as the PA exposure is the largest source of was the largest source of potential risk within Banca Sistema we started this this assurance that by the way was also let's say strongly asked by by the regulator and we completed that.

Speaker #3: It was an assurance on the procedures, the policies, the IT, the organization, and on the numbers, clearly. So, as far as that topic is concerned, that assurance for us is finished, and these are the impacts.

Iacopo De Francisco: As far as that topic is concerned, that assurance for us is finished, and these are the impacts. I cannot say that we won't have any other provisions, clearly, because that is part of the business, but those will be ordinary provisions related to a specific exposure or a specific deal, whatever, as a normal activity. I'm not expecting other extraordinary type of impacts as far as, let's say, the new definitive past view topic is concerned. Now we are very focused on ordinary activities, on clearly putting together the loan books, putting together the data tape, assessing specific positions, but on that topic, I would say the chapter is closed. You were talking about expectation. Sorry, integration cost, I mentioned. Cleanup finished. Did you have another question?

Speaker #3: Then I cannot say that we won't have any other provisions, clearly, because that is part of the business. But those will be ordinary provisions related to a specific exposure or a specific deal, whatever, as a normal activity.

Speaker #3: So I'm not expecting other extraordinary types of impacts as far as, let's say, the new def past due topic is concerned. So now we are very focused on ordinary activities—on clearly putting together the loan books, putting together the data tape, assessing specific positions. But on that topic, I will say the chapter is closed.

Speaker #3: You were talking about expectation sorry integration cost I mentioned cleanup finished. Did you have another question?

Speaker #4: Yeah. Yeah. I was talking about a potential normalized cost of risk within the second half of 2026.

Lorenzo Giacometti: Yeah. I was talking about a potential normalized cost of risk within the H2 of 2026.

Speaker #3: Okay. So if I have to consider a normalized situation, so without the €11.9 million and so forth, I would say that the range we have is in a range of 60 to 70 basis points cost of risk, end of year, normalized.

Iacopo De Francisco: Okay. If I have to consider a normalized situation, without the EUR 11.9 million or so forth, I will say that a range that we have is in a range of 60 to 70 basis points, cost of risk, end of year, normalized.

Speaker #4: Okay. Perfect. Thank you.

Lorenzo Giacometti: Okay, perfect. Thank you.

Speaker #2: Next question is from Davide Rimini, Intesa Sanpaolo.

Operator 7: Next question is from Davide Rimini in Intesa Sanpaolo.

Operator: Next question is from Davide Rimini in Intesa Sanpaolo.

Speaker #4: Good afternoon. Thank you for taking my questions. I have three questions. The first is whether you could share with us your expectations in terms of cost of funding.

Davide Rimini: Good afternoon. Thank you for taking my questions. I have three questions. One is whether you might share with us your expectations in terms of cost of funding. We have seen over the last few quarters improving. If I'm not mistaken, it has actually had quarter-on-quarter last quarter. Seeing sort of the move in rates over the last three months, I was wondering whether you might share with us your thoughts on the cost of funding going forward. The second question is whether you might add few words. I noticed also in the presentation, the amount of badwill has been updated. Whether you might share with us some elements versus the previous number that has been given in Q1.

Speaker #4: We have seen over the last few quarters improving and if I'm not mistaken it is quarter on quarter last quarter and seeing sort of the move in rates over the last three months of course wondering whether you might share with us your thoughts on the cost of funding going forward.

Speaker #4: The second question is whether you might have few words. I noticed also in the presentation the the amount of bedwill has been updated and whether you might share with us some elements versus the previous number that has been given in Q1 and the last question is in terms of one of the first slides was leaving also the theme of M&A optionality which I'm not mistaken was also touched upon at the Q1 results.

Davide Rimini: The last question is in terms of one of the first slides, the theme of M&A optionality, which if I'm not mistaken, was also touched upon at the Q1 results. The question is twofold: whether sort of it's referred to this review of the SBL business. If that is the case, what are the optionalities that you're considering? Whether instead sort of is open to other types of activities in the market since you've been in the press speculated to be looking for some other assets. Thank you.

Speaker #4: The question is twofold. First, is whether 'sort of' is referred to this review of the SBL business, and if that is the case, what are the optionalities that you're considering? Second, is 'sort of' open to other types of activities in the market, since you've been in the press speculated to be looking for some other assets?

Speaker #4: Thank you.

Speaker #3: Davide, sorry, can you repeat a second the point that you made on the review of the NPL activity? You mentioned that or not? Sorry.

Iacopo De Francisco: Davide, sorry. Can you repeat a second the point that you made on the review of the NPL activity? You mentioned that or not? Sorry.

Speaker #4: No, sorry. It was the badwill that, if I'm not mistaken, has now gone up to—.

Davide Rimini: No, sorry. It was the badwill that, if I'm not mistaken.

Iacopo De Francisco: Yeah.

Davide Rimini: It has now gone up to.

Speaker #3: It was the last part regarding the M&A. You mentioned something about that, but we didn't get it properly because the microphone didn't catch your voice correctly.

Iacopo De Francisco: It was the last part regarding the M&A. You mentioned something on that we didn't get properly because the microphone didn't get your voice clearly.

Speaker #4: Sorry. No. The the point on M&A it was just simply sort of whether you can expand I noticed that you put sort of if any while sort of in Q1 it was a bit of a more open.

Davide Rimini: Sorry. No, the point on M&A, it was just simply sort of whether you can expand. I noticed that you put sort of if any, while sort of.

Iacopo De Francisco: Okay

Davide Rimini: Q1 was a bit of a more open. At the same time, if I'm not mistaken, you've been on the press, mentioned to be potentially interested in buying some assets. Now, I was just wondering whether sort of this M&A optionality refers to the SBL review processing that sort of enlarging the footprint of the business.

Speaker #4: At the same time if I'm not mistaken you have been on the press in mentioned to be potentially interested in buying some assets. Now I was just wondering whether sort of these M&A optionality refers to the SBL review.

Speaker #4: Was in that sort of enlarged to enlarge the footprint of the business.

Speaker #3: Okay. Okay. Okay. Sorry. I got sorry. In terms of cost of funding our target this year is you ribor plus 20 to 25 basis point then all we all have our assumption on on your ribor but that is the target that we have.

Iacopo De Francisco: Okay. Sorry. I got. Sorry. In terms of cost of funding, our target this year is Euribor plus 20 to 25 basis points. We all have our assumption on Euribor, but that is the target that we have. In terms of M&A, yes, we are on the newspapers. We are, I would say, active and paying a lot of attention to all the opportunities. As we mentioned last time during the call, we do have three strategic directions that could influence our M&A attitude. First one is to grow in scale in our businesses. Second one is to grow internationally. Third one is to find not organic solution regarding our, let's say, cost of funding. All these type of opportunities are strictly driven and assessed based on return and value creation.

Speaker #3: In terms of M&A, yes, we are in the newspapers. We are, I would say, active and paying a lot of attention to all the opportunities. As we mentioned last time during the call, we do have three strategic directions that could influence our M&A attitude. The first one is to grow in scale in our businesses; the second one is to grow internationally; and the third one is to find a non-organic solution regarding our, let's say, cost of funding.

Speaker #3: All these types of opportunities are strictly driven and assessed based on return and value creation. So, we can look at papers, we can look at documents, and this is what we can say on M&A.

Iacopo De Francisco: We can look at papers, we can look at documents, and this is what we can say on M&A. As I mentioned, Salary SBL, is an area where we need to come up with a decision. Today we are under scale and it is not performing properly as the other business line are performing. We are clearly trying to consider all the potential strategic opportunities to cope with this situation. As far as the badwill is concerned, I will leave the stage to Luca Ghislandi, which is our Head of Planning and Control at group level.

Speaker #3: As I mentioned, salary SBL is an area where we need to come up with a decision. Today, we are under scale and it is not performing properly as the other business lines are performing.

Speaker #3: So we are clearly trying to consider all the potential strategic opportunities to cope with this situation. As far as the Bedwill is concerned, I will leave the stage to Luca Ghislandi, who is our Head of Planning and Control at group level.

Speaker #1: Well thank you Jacopo. All right. With with regard to bedwill what we can say is that in the second quarter basically as you saw we have 97 million of bedwill rising 21 million from the previous quarter mainly as a result of the deconsolidation of KK which had an impact on the tangible book value of the company as you may know there was like a sizable amount of goodwill within the Cruzo Capital company which have been released and so bedwill increased as a result of the deconsolidation of KK.

Christian Carrese: Well, thank you, Jacob.

Iacopo De Francisco: With regard to badwill, what we can say is that in Q2, basically, as you saw, we have EUR 97 million of badwill rising EUR 21 million from the previous quarter, mainly as a result of the deconsolidation of KK, which had an impact on the tangible book value of the company. As you may know, there was a sizable amount of goodwill within the Kruso Kapital company, which has been released, and so badwill increase as a result of the deconsolidation of KK. While other effects are the results of basically slight adjustments on fair value of assets, and of course, as we already said last quarter, we are still working on the PPA process, which, as you know, can last one year. We are advancing on the analysis, but still please consider these figures as provisional, which will be updated on a quarterly basis.

Luca Ghislandi: With regard to badwill, what we can say is that in Q2, basically, as you saw, we have EUR 97 million of badwill rising EUR 21 million from the previous quarter, mainly as a result of the deconsolidation of KK, which had an impact on the tangible book value of the company. As you may know, there was a sizable amount of goodwill within the Kruso Kapital company, which has been released, and so badwill increase as a result of the deconsolidation of KK. While other effects are the results of basically slight adjustments on fair value of assets, and of course, as we already said last quarter, we are still working on the PPA process, which, as you know, can last one year. We are advancing on the analysis, but still please consider these figures as provisional, which will be updated on a quarterly basis.

Speaker #1: While other effects are the result of basically slight adjustments on the fair value of assets, and of course, as we already said last quarter, we are still working on the PPA process, which, as you know, can last like one year.

Speaker #1: We are advancing on the analysis, but still, please consider these figures as provisional, which will be updated on a quarterly basis.

Speaker #4: Thank you. If I may sort of just a follow up on this the last two points. So the first on the bedwill so shall I consider that most of so despite being still 12 months to to assess the PPA but the sort of the amount of bedwill won't probably change but that much versus or at least compared to the delta Q2 versus Q1 if that is a a fair assumption and the second follow up I was just wondering whether since you mentioned three reasoning behind potential M&A I was wondering whether sort of in the way you presented it was in order of preference growing scale international potentially solutions to improve the cost of funding or it was just a sequence.

Davide Rimini: Thank you. If I may, just to follow up on these last two points. The first on the badwill. Shall I consider that most of the, despite being still 12 months to assess the PPA, but the amount of badwill won't probably change by that much, versus, or at least compared to the delta Q2 versus Q1, if that is a fair assumption. The second follow-up, I was just wondering whether, since you mentioned three reasoning behind potential M&A, I was wondering whether, sort of in the way you presented, it was in order of preference, growing scale international, potentially, solutions to improve the cost of funding, or it was just a sequence.

Iacopo De Francisco: On the M&A part, our point is that we want to reduce our cost of funding. If you read, we might have interest in M&A that could reduce our cost of funding, as well as we might have interest in M&A that increase our scale in the businesses in which we are. We might have interest in situations locally or internationally that help us diversifying both from a geographical terms and, let's say, business line terms. We do have, as you well know, high appetite and targets in terms of return. Clearly, both the strategic actions on the asset side and the potential strategic action on the liability side need to prove their, let's say, nature of being accretive.

Speaker #3: On the M&A part, our point is that we want to reduce our cost of funding. So, if you read, we might have interest in M&A that could reduce our cost of funding.

Speaker #3: As well as we might have interest in M&A that increase our scale in the businesses in which we are, we might also have interest in situations, locally or internationally, that help us diversify both in geographical terms and, let's say, business line terms.

Speaker #3: We do have, as you well know, high appetite and targets in terms of return. So, clearly, both the strategic actions on the asset side and the potential strategic action on the liability side need to be proven—need to prove their, let's say, nature of being accretive.

Speaker #3: On the bedwill.

Iacopo De Francisco: On the badwill, basically, let's say that it can change again, probably next quarter, but still we don't expect a sizable change as the one that happened between Q1 and Q2. This quarter has been impacted, as I said before, mainly by the deconsolidation of KK, which won't happen any longer in the future.

Speaker #1: Well, on the bedwill, basically, let's say that it can change again, probably next quarter. But still, we don't expect— we don't expect a sizable change like the one that happened between the first and the second quarter, because this quarter has been impacted, as I said before, mainly by the deconsolidation of KK, which won't happen any longer in the future.

Speaker #4: Thank you.

Davide Rimini: Thank you.

Speaker #3: Maybe additionally on this you can understand that bedwill also in some aspect in some situation can release positive PPA sorry can release can have positive impact so can release some some some numbers.

Iacopo De Francisco: Maybe additionally on this, you can understand that badwill also, in some aspect, in some situation, PPA can have positive impact, can release some numbers. It's a combination of potentially negative with a combination of potentially positive. This is an ongoing process. Let me say that all the areas on which we had to identify something has been identified and been sized, and are within the current number. We don't expect much, but potentially could change still for some minor effects.

Speaker #3: So it's a combination of potential negative with a combination of potentially positive these are ongoing process. Let me say that all the areas on which we had to identify something has been identified and been sized and are within the current numbers.

Speaker #3: So we don't expect much, but potentially, things could still change for some minor effects.

Speaker #4: Thank you.

Davide Rimini: Thank you.

Speaker #2: Next question is from Raul Leonard Sona. Raul Leonard, your line is open. Raul Leonard from Sona, your line is open. For any further questions, please press star and 1 on your touch-tone telephone.

Operator 7: Next question is from Raoul Leonard, Sona.

Operator: Next question is from Raoul Leonard, Sona.

Iacopo De Francisco: We cannot hear.

Operator 7: Your line is open. Raoul Leonard from Sona, your line is open. For any further questions, please press star and one on your touch-tone telephone. Once again, if you wish to ask a question, please press star and one on your telephone. Mr. Carrese, gentlemen, there are no more questions registered at this time.

Operator: Your line is open. Raoul Leonard from Sona, your line is open. For any further questions, please press star and one on your touch-tone telephone. Once again, if you wish to ask a question, please press star and one on your telephone. Mr. Carrese, gentlemen, there are no more questions registered at this time.

Speaker #2: Once again, if you wish to ask a question, please press *1 on your telephone. Mr. Carriza, gentlemen, there are no more questions registered at this time.

Speaker #3: Okay, so thank you to everybody. I'm still Jacopo here, so no, not yet Christian. So just some conclusion, maybe, and thanking you for being here on August 6th.

Iacopo De Francisco: Okay. Thank you to everybody. I'm still Iacopo here, no, not yet Christian. Just some conclusion maybe, and thanking you for being here on 6 August, for three things, three messages I want you to take away. First of all, execution is on or ahead of schedule. Second, the business is growing exactly where it was capital-constrained before. Third one, on the assurance, we took the hard question head on rather than let them linger. We are trying to be, let's say, very effective and very pragmatic. A very important point is that we are confirming the migration to happen at the beginning of November. If that is the case, we will have completed a two-bank merger in seven months. Which definitely will be a super achievement for the teams that are involved. Our focus is really on execution.

Speaker #3: So, three things—three messages—I want you to take away. First of all, execution is on or ahead of schedule. Second, the business is growing exactly where it was capital constrained before.

Speaker #3: Third one on the assurance, we took the hard questions head on rather than letting them linger. So we are trying to be, let's say, very effective and very pragmatic.

Speaker #3: A very important point is that we are confirming the migration to happen at the beginning of November. If that is the case, we will have completed a two-bank merger in seven months.

Speaker #3: So that definitely will be a super achievement for the teams that are involved. Our focus is really on execution, so thanks a lot.

Iacopo De Francisco: Thanks a lot, thanks for joining, thanks for your question, and Christian.

Speaker #3: Thanks for joining. Thanks for for your question and Christian.

Speaker #1: Thank you all. Speak you for the third quarter results. Thank you.

Christian Carrese: Thank you all, and speak to you for the Q3 results.

Iacopo De Francisco: Thank you.

Christian Carrese: Thank you.

Operator 7: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.

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

Operator 8: Shadows high on the darker side. Behind the door, you want to ride. You can make or break. You can win or lose. Got the taste you take, when the heat's on you, and the heat is on. Oh, oh. Oh, oh. Come and put it out, come and put it out, babe. Oh, oh. Oh, oh. Tell me can you feel it, tell me can you feel it, tell me can you feel it. The heat is on.

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