Banco BPM SpA

Investor Presentation • May 8, 2019

Informazione Regolamentata n. 1928-49-2019		Data/Ora Ricezione 08 Maggio 2019 18:10:53	MTA
Societa'	:	Banco BPM S.p.A.
Identificativo Informazione Regolamentata	:	118086
Nome utilizzatore	:	BANCOBPMN01 - Marconi
Tipologia	:	REGEM
Data/Ora Ricezione	:	08 Maggio 2019 18:10:53
Data/Ora Inizio Diffusione presunta	:	08 Maggio 2019 18:10:54
Oggetto	:	Q1 2019 Group Results Presentation
Testo del comunicato

Vedi allegato.

Q1 2019 Group Results Presentation

8 May 2019

DISCLAIMER

This presentation has been prepared by Banco BPM ("Banco BPM"); for the purposes of this notice, "presentation" means this document, any oral presentation, any question and answer session and any written or oral material discussed following the distribution of this document.

The distribution of this presentation in other jurisdictions may be restricted by law or regulation. Accordingly, persons who come into possession of this document should inform themselves of, and observe, these restrictions. To the fullest extent permitted by applicable law, Banco BPM and its subsidiaries disclaim any responsibility or liability for the violation of such restrictions by any person.

This presentation does not constitute or form part of, and should not be construed as, any offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of Banco BPM or any member of its group or any advice or recommendation with respect to such securities, nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities in Banco BPM or any member of its group, or investment decision or any commitment whatsoever. This presentation and the information contained herein does not constitute an offer of securities in the United States or to any U.S. person (as defined in Regulation S under the U.S. Securities Act of 1933 (the "Securities Act"), as amended), Canada, Australia, Japan or any other jurisdiction where such offer is unlawful.

The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating without notice. Certain statements in this presentation are forward-looking statements about Banco BPM. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates" and similar expressions. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements.

Banco BPM does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. All subsequent written and oral forward-looking statements attributable to Banco BPM or persons acting on its behalf are expressly qualified in their entirety by this disclaimer.

None of Banco BPM, its subsidiaries or any of their respective representatives, directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or otherwise arising in connection therewith.

By participating to the presentation of the Group results and accepting a copy of this presentation, you agree to be bound by the foregoing limitations regarding the information disclosed in this presentation.

This presentation includes both accounting data (based on financial accounts) and internal management data (which are also based on estimates).

***

Mr. Gianpietro Val, as the manager responsible for preparing the Bank's accounts, hereby states pursuant to Article 154-bis, paragraph 2 of the Financial Consolidated Act that the accounting data contained in this presentation correspond to the documentary evidence, corporate books and accounting records.

METHODOLOGICAL NOTES

• The new accounting standard IFRS 16 on Leasing contracts became effective beginning on 1 January 2019 and therefore the P&L and balance sheet results of Q1 2019 have been prepared in compliance with the new accounting standard. Banco BPM has chosen to carry out the first-time adoption (FTA) through the modified retrospective approach, which provides the option, established by IFRS 16, of recognizing the cumulative effect of the adoption of the standard at the date of first-time adoption and not restating the comparative information of the financial statements of first-time adoption of IFRS 16. As a result, the figures for 2019 will not be comparable with regard to the valuation of the rights of use, lease payable and related economic effects. For more information and the related impacts, please refer to the Methodological Notes included in the News Release regarding the Q1 2019 consolidated results of Banco BPM issued on 8 May 2019.
• It is noted that, starting from 30/06/2018, ordinary and extraordinary systemic charges related to SRF and DGS have been reclassified from Other Operating Expenses to a dedicated item "Systemic charges after tax". Q1 2018 P&L schemes have been reclassified accordingly.
• It is also reminded that, on 16 April 2019, Banco BPM has accepted the binding offer submitted by Illimity Bank S.p.A. and regarding the sale of a portfolio of Leasing Bad Loans. More in details, the disposal concerns a portfolio for a nominal value of about €650 million at the cut-off date of 30th June 2018, mainly composed of receivables deriving from the active and passive legal relationships related to leasing contracts classified as bad loans, together with the related agreements, legal relationships, immovable or movable assets and the underlying contracts. The closure of the operation is subject to precedent conditions that are customary for transactions of this kind, including the notarial certification for the transferability of the assets, and shall be executed in various phases starting from 30th June 2019, with the conclusion expected by mid-2020. Given the status of the transaction, in this presentation, some Asset Quality indicators, including the stock of Bad Loans, NPE ratios, etc. are also show on a so called "pro-forma" basis post Project L-ACE. These data are simply adjusted data, calculated applying to the stated figures as at 31/03/2019, the estimated impact of the disposal of the afore-mentioned Leasing Bad Loan portfolio. Consequently, they do not represent pro-forma figures, according to Consob rules (Comunicazione CONSOB n. DEM/1052803 of 5-7-2001).
• In this presentation, data relating to the capital position of the Group defined as "pro-forma" are also shown. Please note that they do not represent pro-forma figures according to Consob rules, as specified above, but they are simply adjusted data calculated applying to stated figures the estimated impacts of the capital management actions already signed and to be completed in Q2 2019 described in slide 35.

Agenda

1.	Key Highlights	4
2.	Profitability Analysis	11
3.	Funding and Liquidity	21
4.	Customer Loans and Focus on Credit Quality	27
5.	Capital Position	34
	Annex	37

GROUP Q1 2019 PERFORMANCE HIGHLIGHTS (1/2)

Notes:

1) Asset Quality data 'pro-forma' are calculated with the estimated impact of the disposal of the Leasing Bad Loan portfolio signed in April 2019. See Methodological Notes for more details.

2) Capital data 'pro-forma' are adjusted including the impact of the capital actions to be finalised shortly. See slide 35 for details

GROUP Q1 2019 PERFORMANCE HIGHLIGHTS (2/2)

DERISKING: MATERIAL IMPROVEMENT IN THE RISK PROFILE 1

13,0% 4,9% 3,6% 3,6% 1,5% 1,5% 31/03/2018 31/12/2018 31/03/2019 20,5% 10,7% 10,8% 10,4% 6,5% 6,2% 31/03/2018 31/12/2018 31/03/2019 NPE RATIOS BAD LOAN RATIOS Gross Net 7,5% 5,7% 7,1% 4,9% 6,7% 4,6% 31/03/2018 31/12/2018 31/03/2019 UTP LOAN RATIOS Gross Net Gross Net -1,060bps y/y -90bps q/q -460bps y/y -40bps q/q -990bps y/y -50bps q/q -350bps y/y -10bps q/q -80bps y/y -40bps q/q -110bps y/y -30bps q/q 9,9% 6,1% 31/03/2019 PF (post Project L-ACE) CHANGES (Calculated on PF ratios) (Calculated on PF ratios) 3,1% 1,4% 31/03/2019 PF (post Project L-ACE)

Asset Quality data 'pro-forma' are calculated with the estimated impact of the disposal of the Leasing Bad Loan portfolio signed in April 2019. See Methodological Notes for more details.

SOUND CORE CAPITAL POSITION WITH WIDE BUFFER VS. SREP 2

PHASED-IN CET 1 RATIO

PHASED-IN CET 1 RATIO VS. SREP

FURTHER IMPROVEMENT IN THE CAPITAL STRUCTURE, THANKS TO THE ISSUE OF €300M OF AT1 NOTES IN APRIL 2019 (See Slide 45 for details)

Note: 31/03/2019 ratios include also the Net Income of the quarter. Prof-forma capital data are adjusted including the capital action impacts (see slide 35 for details), without considering any positive effects of the L-ACE transaction

BALANCE SHEET STRATEGY & CUSTOMER VOLUMES 3

Good volume growth, coupled with lower risk profile, better financial asset composition and strong liquidity position

€ bn	31/03/2019	31/12/2018	31/03/2018	Chg. y/y	Chg. q/q
Net Performing Customer Loans	99.9	97.3	94.8	5.3%	2.7%
Net NPE €6.4bn PF post L-ACE1 project o/w Net UTP	6.6 4.9	6.7 5.0	11.4 6.1	-42.0% -19.6%	-2.0% -3.4%
Govies in HTCS o/w Italian in HTCS	11.1 6.9	11.7 6.6	12.8 9.3	-13.3% -25.4%	-5.4% 5.3%
C/A & Deposits (Sight + Time)	83.4	81.1	78.8	5.8%	2.8%
Total eligible securities	53.6	52.1	48.5	10.4%	3.0%

Selected KPIs as at 31/03/2019

1. Monthly LCR of March 2019; Q1 2019 NSFR based on management estimates.

PROFITABILITY: SUPPORTED BY CONSISTENT REDUCTION IN COSTS AND IN LOAN LOSS PROVISIONS 4

MAIN P&L ITEMS

€ m	Q1 2019	Q4 2018	Q1 2018	Chg. y/y	Chg. q/q
Total Revenues	1,063	1,022	1,168	-8.9%	4.0%
Total Operating Costs	-670	-725	-702	-4.4%	-7.5%
Profit from operations	393	297	466	-15.7%	32.1%
Loan Loss Provisions	-152	-987	-326	-53.4%	-84.6%
Profit before tax	242	-909	297	-18.6%	n.s.
* Net Profit	150	-581	223	-32.6%	n.s.
	Q1 2019	FY 2018	Q1 2018
Cost of Risk (in bps, annualised)	57	184	123
		116 bps excluding	top-up provisions in relation

to the Exodus and ACE transactions

(*) Net profit includes systemic charges (SRF), post tax for €42m in Q1 2019 and €49m in Q1 2018.

Agenda

1.	Key Highlights	4
2.	Profitability Analysis	11
3.	Funding and Liquidity	21
4.	Customer Loans and Focus on Credit Quality	27
5.	Capital Position	34
	Annex	37

NET INTEREST INCOME

Y/Y comparison

Calendar effect 12

NII core on a like-for-like basis 525 511 -2.8%

• NII is largely impacted by elements not related to the core business: -€81m y/y and - €23m q/q (see table below)
• On a 'core' basis, NII is down by 1.9% y/y, due to lower spreads in the commercial retail network, almost compensated by higher average volumes
• The q/q trend of 'core' NII is also affected by the calendar day effect (-€12m for 2 days less)
• Q/Q commercial volumes, which increased point-in-time, were almost stable on an average basis: a good starting point for the next quarters¹

€ m	Q1 18	Q4 18	Q1 19
OTHER	87	29	6
o/w: PPA	21	-1	2
o/w: IFRS 9 PPA	38	21	4
o/w: IFRS 9	27	9	3
o/w: IFRS 16	0	0	-2

1. See slide 29 for details.

NET INTEREST SPREAD IN COMMERCIAL BANKING

Customer spread at 1.47%, thanks to the stabilisation in the asset spread, coupled with a 1 bps improvement in the liability spread (q/q)

NET FEES AND COMMISSIONS (Quarterly Evolution)

• Y/Y reduction of the 'Management & Advisory' component: almost entirely due to upfront fees within the placement of investment products, which was particularly strong in Q1 2018. At the same time, running fees were broadly stable
• Q/Q trend affected by:
  • 'Management & Advisory':
    • AUM & AUC fees were broadly stable, also in light of the placement of capital-protected certificates (~€0.5bn in Q1), which give no contribution to commissions (worth around €10m, booked under NFR);
    • drop in credit cards fees, which were structurally stronger in Q4 2018, due to seasonal and non-recurring effects
  • Other commissions: notwithstanding a y/y growth in new lending (from €3.8bn to €5.5bn), credit commissions registered a drop in Q1, mainly due to seasonality effects (new structured finance and syndicated loans down from €1.7bn in Q4 to €0.9bn in Q1)
• April 2019 shows a good performance in the placement of AuM products which, together with the increase in deposits, gives confidence for commission recovery during the year

NET FINANCIAL RESULT

• Net Financial Result stood at €87m in Q1 2019 (+€57m y/y)
• 70% of the stake in Nexi (1.6%) was sold: Q1 2019 NFR includes about €60m of capital gains (pre-tax) on Nexi, of which €42.4m realized in the IPO and €17.4m via the revaluation of the remaining stake held at €8.5 per share
• Net Financial Result: +€161m q/q vs. the Q4 2018 result, which was impacted by the full impairment of Carige bonds, corporate spread widening and hedging strategy
• Q1 NFR partially penalized by the prudent hedging strategy approach, which supported the improvement in the gross HTCS reserve on debt securities (over €130m in Q1 2019)

OPERATING COSTS

(

• Operating costs were down 4.4% y/y and 5.1% y/y on an underlying basis, thanks to the ongoing strict cost control
• In the quarter: operating costs were down by 7.5% and flat on a like-for-like basis (net of non recurrent items)
• Since Q1 2019, with the adoption of IFRS16, roughly €25m of costs previously included in Other Administrative Expenses are now accounted under Depreciation & Amortization. The net effect of this reclassification on Operating Costs is essentially zero

PERSONNEL EXPENSES (Quarterly Evolution)

• In Q1 2019, Personnel expenses were down 3.7% y/y, mainly thanks to the headcount reduction (about 1,000 less y/y)
• Personnel expenses were slightly up q/q, mainly due to the reversal of the incentive scheme registered in Q4 2018
• Total headcount stood at 22,175 on 31 March 2019, down by 72 resources since 1 January 2019

OTHER ADMINISTRATIVE EXPENSES (Quarterly Evolution)

• Since Q1 2019, with the adoption of IFRS16, roughly €25m of costs previously included in Other Administrative Expenses are now accounted under Depreciation & Amortization
• Excluding IFRS 16, other administrative expenses registered a strong decrease: -8.9% y/y and -6.3% q/q, confirming the strict cost control

LOAN LOSS PROVISIONS & COST OF CREDIT

• Loan loss provisions in Q1 2019 have benefited from the solid derisking carried out in FY 2018: annualized cost of risk at 57 bps
• Cost of risk benefited from the solid derisking in FY 2018 and contributes to the build-up of profitability
• Positive expectations supported also by good flows, with a reduction in both net inflows from performing loans to NPE (-36.3% y/y) and flows from UTP to Bad Loans (-34.3% y/y)

Notes:

• 1. Calculated adding to LLPs also €2.4m of generic provisions related to the Exodus and ACE Senior Tranches, classified under the Item Net Adjustments on other assets, in coherence with the aggregate of Net Customer Loans.
• 1. For a proper calculation of CoR of FY 2018, customer loans at year-end include also loans classified as Discontinued Operations (Bad Loans related to ACE transaction and Profamily loans to be disposed).

ALL KEY DRIVERS UNDERLYING THE COST OF RISK SHOW A SIGNIFICANT IMPROVEMENT

FLOWS FROM UTP TO BAD LOANS

Agenda

1.	Key Highlights	4
2.	Profitability Analysis	11
3.	Funding and Liquidity	21
4.	Customer Loans and Focus on Credit Quality	27
5.	Capital Position	34
	Annex

DIRECT FUNDING

Healthy growth in core deposits, with concurrent decline in more expensive sources of funding

CHANGE In % Y/Y In % Q1 C/A & Sight deposits 8.1% 3.3% Time deposits -42.3% -13.4% Bonds -21.7% -6.0% Other -16.7% -2.8% Capital-protected Certificates -3.5% 8.6% Direct Funding (excl. Repos) 0.1% 1.6%

• Direct funding at €103.1bn, up by 1.6% in Q1 (+0.1% y/y), with a particularly positive dynamic of C/A and sight deposits (+8.1% y/y and +3.3% in Q1)
• Q1 trend shows a growth also in Capital-protected certificates (+8.6%)

Notes: 1. Direct funding restated according to a management logic: it includes capital-protected certificates, recognized under 'Held-for-trading liabilities', while it does not include Repos (€9.9bn at March 2019), mainly transactions with Cassa di Compensazione e Garanzia.

BOND MATURITIES: VERY MANAGEABLE AMOUNTS

Institutional bonds:

• Following the maturity of €1.7bn in Q1 2019 (substantially in March), maturities in the remaining part of 2019 are limited to €0.1bn
• Very manageable amount of maturities in both 2020 (€2.4bn) and 2021(€2.1bn), with an average spread of 2.5%, to be replaced at better funding conditions
• Successful new issuance activity on the wholesale markets, with total placements of €1.05bn, o/w: €0.75bn of Senior bonds in March (spread at 2.05%) and €300m of AT1 in April

STRONG LIQUIDITY POSITION

€ bn - Internal management data, net of haircuts

1. Monthly LCR of March 2019; Q1 2019 NSFR based on management estimates.

SECURITIES PORTFOLIO

Prudent diversification, with solid liquidity and support of NII

€ bn
				Chg. y/y	Chg. Q1
	31/03/19	31/12/18	31/03/18	Value	Value
Debt securities	34.2	32.9	32.0	2.2	1.3
- o/w Total Govies	29.3	27.5	26.3	3.1	1.8
- o/w: Italian Govies	20.0	17.7	19.0	1.0	2.4
-o/w: in FVTPL	2.2	0.8	0.8	1.4	1.4
IT Govies in % on Tot. Govies	68.2%	64.1%	72.5%
~66% excluding the portfolio of Akros (almost entirely trading)
Equity securities, Open-end funds & Private equity	2.5	1.8	2.0	0.5	0.7
TOTAL SECURITIES	36.7	34.7	34.0	2.7	2.0

	31/03/19	31/12/18	31/03/18	Chg. y/y	Chg. in Q1
Govies in HTCS	11.1	11.7	12.8	-1.7	-0.6
- Italian	6.9	6.6	9.3	-2.4	0.3
- Non Italian	4.2	5.1	3.5	0.7	-1.0
Govies in HTC	15.7	15.1	12.7	3.0	0.7
- Italian	10.9	10.3	9.0	1.9	0.6
- Non Italian	4.8	4.7	3.7	1.1	0.1

Total Govies at €29.3bn

• HTCS: -€1.7bn y/y and -€0.6bn in Q1
• HTC: share on total Govies up to 54% from 48% as at 31/03/2018
• Italian Govies at €20.0bn: increase in Q1 mainly due to short-term maturing trading positions held in the portfolio of Akros (+€1.4bn in Q1):
  • HTCS: at 35% of total Italian Govies vs. 37% at YE 2018 and 49% at 31/03/2018
  • Modified duration (HTCS): ~2.6 years vs 2.7 years at YE 2018¹
• Spread sensitivity of Italian Govies in HTCS at ~€1.6m: down from about €3.5m in Q2 2018
• Non-Italian Govies at €9.3bn: primarily USA (€3.7bn), France (€3.1bn), Spain (€1.4bn) and Germany (€0.7bn)
• Gross HTCS reserve on debt securities at about -€60m at 31/03/2019, improving by >€130m in Q1

INDIRECT CUSTOMER FUNDING AT €89.4BN

• Managed Accounts and Funds of Funds
• Bancassurance
• Funds & Sicav

• Total Indirect Customer Funding at €89.4bn: -0.9% y/y, with a good recovery in Q1 2019 (+3.2%), thanks to better financial market conditions
• The positive quarterly trend has been registered both in Assets under Management (+2.4%), especially in the Funds & Sicav component, as well as in Assets under Custody (+4.8% q/q)

Notes:

Historic PF data exclude the volumes of the Custodian banking activity sold in September 2018 and other commercial adjustments. 1. AuC are net of capital-protected certificates, as they have been regrouped under Direct Funding (see slide 22).

Agenda

Key Highlights	4
Profitability Analysis	11
Funding and Liquidity	21
Customer Loans and Focus on Credit Quality	27
Capital Position	34

Annex 37

NET CUSTOMER LOANS

Satisfactory increase in Performing Loans, with new loan granting of €5.5bn in Q1 2019

Net Customer Loans¹

• Yearly trend of total Net Customer Loans impacted above all by the solid derisking performed
• Good performance of Net Performing loans, +5.3% y/y and +2.7% in Q1, confirming a solid commercial performance
• €5.5bn of new mortgage and personal loans granted in the period (€1.3bn to Households and €4.2bn to Corporates)² vs. €3.8bn in Q1 2018

Notes:

1. Internal management data. 'Corporate' includes SMEs, Large Corporates, Institutional Customers and Third Sector.

^1. Loans and advances to customers at Amortized Cost, including also the Exodus and ACE senior notes. Year-end 2018 data already excluded €1.3bn Bad Loans (having being classified as discontinued operation), then disposed with the ACE project in Q1 2019. Data at year-end 2018 and as at 31/03/2019 exclude €0.3bn Profamily loans, classified as Discontinued Operations as at 31/12/2018.

NET PERFORMING CUSTOMER LOANS: ANALYSIS

Constant increase in Core Customer Loans

Net Performing Loans as at 31/03/2019

• "Core customer loans", representing 90% of Performing loans, grow by +4.6% y/y and +1.8% in Q1, driven by the good performance of Mortgages loans (+9.3% y/y and +3.5% in Q1)
• Strong decrease in the "Non-core" components Repos (-21.5% y/y and -7.1% in Q1) and Leasing (-12.1% y/y and -1.7% in Q1)

NPE: MASSIVE REDUCTION Y/Y, WITH GROSS AND NET NPE PF DOWN BY €13.5BN AND €4.9BN RESPECTIVELY

Gross NPE: stock evolution

Net NPE: stock evolution

CHANGE PF	Chg. y/y		Chg. in Q1
€/m and %	Value	%	Value	%
Bad Loans	-11,480	-73.9%	119	3.0%
on a PF basis	-12.1bn	-78%	-0.5bn	-13%
UTP	-1,422	-15.9%	-240	-3.1%
Past Due	16	20.9%	-11	-10.2%
TOTAL NPE	-12,885	-52.4%	-132	-1.1%
on a PF basis	-13.5bn	-55%	-0.8bn	-6%

Asset Quality data pro-forma as at 31/03/2019 are calculated with the estimated impact of the disposal of Leasing Bad Loan portfolio signed in April 2019 (project L-ACE). See Methodological Notes for more details.

CHANGE PF	Chg. y/y		Chg. in Q1
€/m and %	Value	%	Value	%
Bad Loans	-3,587	-68.6%	47	3.0%
on a PF basis	-3.7bn	-72%	-0.1bn	-6%
UTP	-1,191	-19.6%	-174	-3.4%
Past Due	11	16.8%	-9	-10.8%
TOTAL NPE	-4,767	-42.0%	-136	-2.0%
on a PF basis	-4.9bn	-43%	-0.3bn	-4%

Notes: Data at year-end 2018 already excluded €1.3bn of Bad Loans , having being classified as discontinued operation and then disposed of with the ACE project in Q1 2019.

30 4. Customer Loans and Focus on Credit Quality

BREAKDOWN OF NPE PORTFOLIO PF AS AT 31/03/2019

• - Very limited share of Bad Loans: outlier in the Italian market
• - Predominant weight of secured exposures, with high level of collateralization

• Very limited share of Bad Loans, accounting for just 31% of total Gross NPE and 23% of Total Net NPE as at 31/03/2019 PF¹ : significantly better vs. the average of the Italian banking system (-23p.p.)
• High share of secured loans: at 64% PF of total Gross NPE, 13p.p. higher than the average of the Italian banking system
• Share of secured loans on total net NPE up at 72% PF (83% for Bad Loans and 69% for UTP & PD)

Note:

• 1. Pro-forma post Project L-ACE. See Methodological Notes for more details.
• 1. Bank of Italy: Stability Financial Report, May 2019
• 1. Bank of Italy: statistical data as Dec. 2018.
• 31 4. Customer Loans and Focus on Credit Quality

CONSERVATIVE COVERAGE LEVELS IN SPITE OF THE SHARP DROP IN THE SHARE OF BAD LOANS

Coverage level impacted by the sharp drop in Bad Loans

• NPE coverage at 43.6%, up at 45.9% incl. write-offs, factoring in a lower share of Bad Loans, better than the Italian Banking System, as well as a higher share of secured positions and a lower vintage (see previous slide)
• Bad Loan coverage at 59.6% , up at 64.1% incl. write-offs, confirming the level reached at YE 2018
• UTP coverage at 35.3% (+3.0p.p. vs. year-end 2017), further strengthened in Q1 (+30bps), notwithstanding the strong reduction of cost of credit registered in the quarter

Note:

^1. The IFRS 9 FTA impact on NPE coverage (specifically on Bad Loans) for new Impairment models translated into an increase of NPE Adjustments of €1.2bn as at 01/01/2018.

FOCUS ON UTP LOANS: HIGH SHARE OF RESTRUCTURED AND SECURED POSITIONS

UTP analysis

Breakdown of Net UTPs as at 31/03/2019

• Solid level of coverage for unsecured UTP: 47.1%
• Net Restructured loans (€2.3bn) account for 48.1% of total net UTP: they are essentially related to formalized underlying restructuring plans and procedures (mainly under Italian credit protection procedures)
• Net unsecured UTP other than Restructured loans are limited to €0.4bn
• 92% of Net UTPs are located in the northern & central parts of Italy

Agenda

5.	Capital Position	34
4.	Customer Loans and Focus on Credit Quality	27
3.	Funding and Liquidity	21
2.	Profitability Analysis	11
1.	Key Highlights	4

Annex 37

CET 1 RATIO PRO-FORMA: AT 11.8% FL AND 13.7% PHASE-IN

CET 1 ratio Fully Loaded: evolution details

• The stated FL CET1 ratio stood at 10.8% as at 31/03/2019, benefitting from the performance in Q1 2019 as well as from various elements¹
• On a pro-forma basis, the FL CET 1 ratio is up at 11.8%, benefiting from the remaining capital management actions already signed and set to be finalized in Q2 2019
• The pro-forma Phase-in CET 1 ratio comes in at 13.7%, with a buffer of 440bps versus the 2019 SREP requirement (9.31%)

Ratios as at 31/03/2019 include also the Net Income of the quarter. Note:

1. Various elements include: GACS transactions, Agos dividend distribution as part of the agreement with Crédit Agricole on Consumer Credit, performance of HTCS reserves.

CONCLUSIONS & OUTLOOK FOR 2019

Q1 2019:

• Further improvement in cost and operating efficiency, with additional room for core revenue growth
• Significant derisking, with gross and net NPE ratios down at 9.9% and 6.1%, respectively (including the disposal of Leasing Bad Loans)
• Cost of risk down as expected, benefiting from the strong and accelerated derisking in FY 2018 and contributing to the build-up of sustainable profitability
• Solid funding and liquidity position

Outlook for FY 2019:

Strengthening in the Group's capital position

Profitability expected to strengthen progressively in the next quarters

Agenda

Annex

ANNEX RECLASSIFIED BALANCE SHEET AS AT 31/03/2019

	A	B	C	Chg. A/B		Chg. A/C
Reclassified assets (€ m)	31/03/2019	31/12/2018	31/03/2018	Value	%	Value	%
Cash and cash equivalents	804	922	830	-118	-12.8%	-26	-3.1%
Loans and advances measured at AC	111,592	108,208	111,839	3,384	3.1%	-246	-0.2%
- Loans and advances to banks	5,123	4,193	5,670	929	22.2%	-548	-9.7%
- Loans and advances to customers (*)	106,470	104,015	106,168	2,455	2.4%	301	0.3%
Other financial assets	38,957	36,853	36,280	2,104	5.7%	2,677	7.4%
- Assets measured at FV through PL	7,551	5,869	6,251	1,682	28.7%	1,300	20.8%
- Assets measured at FV through OCI	14,882	15,352	16,712	-469	-3.1%	-1,830	-10.9%
- Assets measured at AC	16,524	15,632	13,317	891	5.7%	3,206	24.1%
Equity investments	1,358	1,434	1,369	-77	-5.3%	-12	-0.8%
Property and equipment	3,528	2,776	2,756	752	27.1%	773	28.0%
Intangible assets	1,275	1,278	1,304	-3	-0.2%	-29	-2.2%
Tax assets	4,944	5,012	4,852	-68	-1.4%	92	1.9%
Non-current assets held for sale and discont. operations	281	1,593	5	-1,312	-82.4%	276	n.m.
Other assets	3,100	2,389	3,018	711	29.8%	82	2.7%
Total	165,839	160,465	162,253	5,375	3.3%	3,587	2.2%
				C Chg. A/B
	A	B				Chg. A/C
Reclassified liabilities (€ m)	31/03/2019	31/12/2018	31/03/2018	Value	%	Value	%
Due to banks	31,400	31,634	29,555	-234	-0.7%	1,844	6.2%
Direct Funding	109,320	105,220	102,121	4,100	3.9%	7,198	7.0%
- Deposits from customers	95,232	90,198	83,749	5,035	5.6%	11,484	13.7%
- Debt securities and financial liabilities desig. at FV	14,087	15,022	18,373	-935	-6.2%	-4,286	-23.3%
Debts for Leasing	810
Other financial liabilities designated at FV	7,806	7,229	8,414	577	8.0%	-608	-7.2%
Liability provisions	1,600	1,705	1,563	-105	-6.2%	37	2.4%
Tax liabilities	512	505	663	6	1.2%	-152	-22.9%
Liabilities associated with assets held for sale	4	3	4,935	1	44.3%	-4,930	-99.9%
Other liabilities	3,825	3,864	3,872	-39	-1.0%	-47	-1.2%
Minority interests	44	46	55	-1	-2.9%	-11	-19.3%
Shareholders' equity	10,519	10,259	11,074	260	2.5%	-555	-5.0%

ANNEX Q1 2019 RECLASSIFIED P&L: ANNUAL COMPARISON

Reclassified income statement	Q1 2019	Q1 2018	Chg. Y/Y	Chg. Y/Y
(in euro million)	Stated	Stated		%
Net interest income	505.2	595.1	-90.0	-15.1%
Income (loss) from investments in associates carried at
equity	36.8	42.6	-5.8	-13.7%
Net interest, dividend and similar income	541.9	637.7	-95.8	-15.0%
Net fee and commission income	420.0	476.5	-56.5	-11.9%
Other net operating income	14.6	24.2	-9.5	-39.5%
Net financial result	86.8	29.3	57.5	196.3%
Other operating income	521.5	530.0	-8.5	-1.6%
Total income	1,063.4	1,167.7	-104.3	-8.9%
Personnel expenses	-425.9	-442.1	16.2	-3.7%
Other administrative expenses	-167.0	-211.5	44.5	-21.0%
Amortization and depreciation	-77.6	-47.9	-29.7	61.9%
Operating costs	-670.5	-701.5	31.0	-4.4%
Profit (loss) from operations	392.9	466.2	-73.3	-15.7%
Net adjustments on loans to customers	-152.0	-326.2	174.3	-53.4%
Net adjustments on other financial assets	-4.0	2.2	-6.2	n.m.
Net provisions for risks and charges	4.4	-25.0	29.4	n.m.
Profit (loss) on the disposal of equity and other	0.2	179.7	-179.5	-99.9%
investments
Income (loss) before tax from continuing operations	241.6	296.9	-55.3	-18.6%
Tax on income from continuing operations	-50.7	-25.9	-24.8	95.5%
Systemic charges after tax	-41.6	-49.0	7.4	-15.1%
Income (loss) after tax from discontinued operations	0.0	0.0	0.0	n.m.
Income (loss) attributable to minority interests	1.2	1.4	-0.2	-12.9%
Net income (loss) for the period	150.5	223.3	-72.8	-32.6%

ANNEX Q1 2019 RECLASSIFIED P&L: QUARTERLY EVOLUTION

Reclassified income statement	Q1 2019	Q1 2018	Q2 2018	Q3 2018	Q4 2018
(in euro million)	Stated	Stated	Stated	Stated	Stated
Net interest income	505,2	595,1	585,0	557,8	554,7
Income (loss) from investments in associates carried at
equity	36,8	42,6	33,4	32,8	50,7
Net interest, dividend and similar income	541,9	637,7	618,4	590,6	605,4
Net fee and commission income	420,0	476,5	451,0	451,4	469,9
Other net operating income	14,6	24,2	130,0	214,5	21,1
Net financial result	86,8	29,3	80,2	46,8	-73,9
Other operating income	521,5	530,0	661,2	712,7	417,0
Total income	1.063,4	1167,7	1279,6	1303,2	1022,4
Personnel expenses	-425,9	-442,1	-437,1	-431,5	-422,2
Other administrative expenses	-167,0	-211,5	-203,1	-196,2	-205,7
Amortization and depreciation	-77,6	-47,9	-49,0	-49,5	-97,1
Operating costs	-670,5	-701,5	-689,2	-677,1	-725,0
Profit (loss) from operations	392,9	466,2	590,4	626,1	297,4
Net adjustments on loans to customers	-152,0	-326,2	-360,2	-267,4	-987,3
Net adjustments on other financial assets	-4,0	2,2	-1,6	-1,3	4,0
Net provisions for risks and charges	4,4	-25,0	-20,7	-71,9	-227,8
Profit (loss) on the disposal of equity and other investments	0,2	179,7	-1,1	-10,3	5,1
Income (loss) before tax from continuing operations	241,6	296,9	206,8	275,2	-908,6
Tax on income from continuing operations	-50,7	-25,9	-61,3	-72,3	322,4
Systemic charges after tax	-41,6	-49,0	-18,4	-32,1	-0,7
Income (loss) after tax from discontinued operations		0,0	0,0	0,9
Income (loss) attributable to minority interests	1,2	1,4	2,2	0,3	5,8
Net income (loss) for the period excluding Badwill & Impairment of goodwill and client relationship	150,5	223,3	129,3	171,9	-581,0
Impairment of goodwill and client relationship					-2,9
Net income (loss) for the period	150,5	223,3	129,3	171,9	-584,0

ANNEX Q1 2019 RECLASSIFIED P&L – IFRS 9 AND PPA IMPACTS

	(A-B):
	A	B	C	D	(C-D)
	Q1 19	Q1 19	Q1 19
Reclassified income statement (in euro million)	Stated	CE ex ppa	TOTAL PPA	o/w PPA Bad loans	o/w other	Ricl. IFRS 9
Net interest income	505.2	499.2	6.0	4.3	1.7	7.0
Income (loss) from investments in associates carried at equity	36.8	36.8	0.0
Net interest, dividend and similar income	541.9	535.9	6.0	4.3	1.7	7.0
Net fee and commission income	420.0	420.0	0.0
Other net operating income	14.6	24.2	-9.6		-9.6
Net financial result	86.8	86.8	0.0
Other operating income	521.5	531.0	-9.6	0.0	-9.6	0.0
Total income	1063.4	1067.0	-3.6	4.3	-7.9	7.0
Personnel expenses	-425.9	-425.9	0.0
Other administrative expenses	-167.0	-167.0	0.0
Amortization and depreciation	-77.6	-74.8	-2.8		-2.8
Operating costs	-670.5	-667.7	-2.8	0.0	-2.8	0.0
Profit (loss) from operations	392.9	399.3	-6.3	4.3	-10.6	7.0
Net adjustments on loans to customers	-152.0	-152.0	0.0			-7.0
Net adjustments on other assets	-4.0	-4.0	0.0
Net provisions for risks and charges1	4.4	4.4	0.0
Profit (loss) on the disposal of equity and other investments	0.2	0.2	0.0
Income (loss) before tax from continuing operations	241.6	247.9	-6.3	4.3	-10.6	0.0
Tax on income from continuing operations	-50.7	-52.8	2.0	-1.4	3.5
Systemic charges after tax	-41.6	-41.6	0.0
Income (loss) after tax from discontinued operations		0.0	0.0
Income (loss) attributable to minority interests	1.2	1.2	0.0
Net income (loss) for the period	150.5	154.8	-4.3	2.9	-7.2	0.0

ANNEX CUSTOMER LOAN ANALYSIS

Retail and SME-oriented banking group, with franchise concentrated in Northern Italy

Breakdown of net loans by customer segment at 31/03/2019

Breakdown of net loans by geographical area at 31/03/2019

Note:

This analysis of Total Net Customer Loans excludes the GACS Senior Notes.

1. Non-financial companies (mid-corporate and small business) and financial companies. Includes also €5.8bn of Repos, mainly with Cassa di Compensazione e Garanzia.

ANNEX CREDIT QUALITY DETAILS

€ m
	31/03/2019
	Gross exposure	Adjustments	Coverage	Net exposure
Bad Loans	4,058	2,420	59.6%	1,638
Unlikely to pay	7,528	2,654	35.3%	4,874
Past Due	9 5	1 7	18.1%	7 8
Non-performing Loans	11,682	5,091	43.6%	6,591
Performing Loans	100,254	375	0.37%	99,879
Total Customer Loans	111,936	5,466	4.9%	106,470
			31/12/2018
	Gross exposure	Adjustments	Coverage	Net exposure
Bad Loans	3,939	2,348	59.6%	1,591
Unlikely to pay	7,768	2,720	35.0%	5,048
Past Due	106	1 9	17.5%	8 8
Non-performing Loans	11,814	5,087	43.1%	6,727
Performing Loans	97,659	371	0.38%	97,288
Total Customer Loans	109,473	5,458	5.0%	104,015
		31/03/2018
	Gross exposure	Adjustments	Coverage	Net exposure
Bad Loans	15,538	10,312	66.4%	5,226
Unlikely to pay	8,950	2,885	32.2%	6,065
Past Due	7 9	1 2	15.3%	6 7
Non-performing Loans	24,567	13,209	53.8%	11,358
Performing Loans	95,199	388	0.41%	94,810
Total Customer Loans	119,766	13,597	11.4%	106,168

Data refer to Loans and advances to customers measured at Amortized Cost, including also the Exodus & ACE Senior Notes.

FY 2018 data exclude Bad Loans to be disposed with the ACE project and Profamily loans, classified as Discontinued Operations as at 31/12/2018.

ANNEX FOCUS ON BAD LOANS: DETAILED ANALYSIS

Bad Loans: evolution and composition

• Secured/Unsecured composition in terms of GBV (73%/27%) well above the industry average (49%/51%) 1 .
• Unsecured bad loans limited at NBV of €0.3bn

Notes: 1. Report PWC "The Italian NPL Market– Entering a New Era", December 2018.

ANNEX CAPITAL POSITION IN DETAIL

PHASED IN CAPITAL POSITION (€/m and %)	31/03/2019 Pro-forma	31/03/2019 Stated	31/12/2018	RWA COMPOSITION
CET 1 Capital	8,836	8,144	7,754	(€/bn)	31/03/2019 Pro-forma	31/03/2019 Stated	31/12/2018
T1 Capital	9,269	8,278	7,888
Total Capital	10,721	9,729	9,442	CREDIT & COUNTERPARTY RISK	55.6	55.4	56.3
RWA	64,446	64,216	64,324	of which: Standard	29.8	29.6	27.7
				MARKET RISK	2.6	2.6	1.9
CET 1 Ratio	13.71%	12.68%	12.05%
AT1	0.67%	0.21%	0.21%	OPERATIONAL RISK	6.0	6.0	5.9
T1 Ratio	14.38%	12.89%	12.26%	CVA	0.2	0.2	0.2
Tier 2	2.25%	2.26%	2.42%	TOTAL	64.4	64.2	64.3
Total Capital Ratio	16.63%	15.15%	14.68%

FULLY PHASED CAPITAL	31/03/2019	31/03/2019
POSITION (€/m and %)	Pro-forma	Stated	31/12/2018	RWA COMPOSITION	31/03/2019	31/03/2019
CET 1 Capital	7,584	6,892	6,406	(€/bn)	Pro-forma	Stated	31/12/2018
T1 Capital	7,888	6,896	6,410
Total Capital	9,339	8,347	7,964	CREDIT & COUNTERPARTY	55.4	55.1	56.0
				RISK
RWA	64,170	63,940	64,034	of which: Standard	29.8	29.6	27.4
CET 1 Ratio	11.82%	10.78%	10.00%	MARKET RISK	2.6	2.6	2.0
AT1	0.47%	0.01%	0.01%	OPERATIONAL RISK	6.0	6.0	5.9
T1 Ratio	12.29%	10.78%	10.01%	CVA	0.2	0.2	0.2
Tier 2	2.26%	2.27%	2.43%	TOTAL	64.2	63.9	64.0
Total Capital Ratio	14.55%	13.05%	12.44%

Notes:

• Q1 2019 ratios (both stated and pro-forma) include the net income of the period.
• 31/03/2019 ratios Pro-forma include capital management actions already signed and to be finalized in Q2 2019.

CONTACTS FOR INVESTORS AND FINANCIAL ANALYSTS

I N V E S T O R R E L A T I O N S

Roberto Peronaglio	+39-02-9477.2090
Tom Lucassen	+39-045-867.5537
Arne Riscassi	+39-02-9477.2091
Silvia Leoni	+39-045-867.5613

Registered Offices: Piazza Meda 4, I-20121 Milan, Italy Corporate Offices: Piazza Nogara 2, I-37121 Verona, Italy

investor.relations@bancobpm.it www.bancobpm.it (IR Section)