Intesa Sanpaolo S.p.A.

Carlo Messina - CEO

Francesca Tondi - Morgan Stanley Matteo Ramenghi - UBS Benjie Creelan-Sandford - Macquarie Carlo Digrandi - HSBC Giovanni Carriere - Autonomous Research Ignacio Cerezo - Credit Suisse Azzurra Guelfi - Citi Andrea Filtri - Mediobanca Alberto Cordara - Merrill Lynch Christian Carrese - Intermonte Domenico Santoro - KBW

Good afternoon, ladies and gentlemen, and welcome to our call to discuss Intesa Sanpaolo’s third quarter results for 2013. This is Carlo Messina, Chief Executive Officer and I am joined by Stefano Del Punta, Chief Financial Officer and Marco Delfrate of the Investor Relations.

I’m new as CEO but I have interacted with you over the years in my CFO role, afterwards as General Manager and in Italy as Deputy CEO, Head of Bank Territory and Board Member. On investment I’ll note, we’re presenting our quarterly results, I would like to thank Enrico Cucchiani, who has been leading the bank for the last nine months.

Going through the documents, you will notice a degree of continuity in the key messages and course the whole of today’s presentation. However, top of these, you would also see new priorities relating to how we leverage our team and the work we are doing on a new business plan.

We also set up some of the changes that we launched and implemented during the last quarter, mainly focused on back of the territory that would become one of the drivers in delivering shareholder value. So, let’s go to page number 1 and let me start with saying that our strength of Intesa Sanpaolo is leveraged an experienced, cohesive and motivated management team leading 94,200 employees.

So, our greatest asset is from our people. Right now [indiscernible], in the first nine months, this team has delivered against our promises as stated in pervious analyst presentations.

We remain one of the most solid and best capitalized banks in the world, pro-forma common equity ratio up at 11.5%, with regard to provisioning our NPL coverage already best-in-class is increased by further 180 basis points since the end of the 2012 and by 30 basis points in the last quarter. In addition, our cash coverage of performing loans is up to further EUR25 million this quarter, which would have been EUR100 million on the basis of flat coverage.

Liquidity coverage ratio and net stable fund ratio remained well above 100% and we now have 92 billion of unencumbered eligible asset to highest level since 2010. Leverage is down at 17.4% and loan to deposit ratio 96%.

Net fee and commissions are up 13.9% on yearly basis as part of our guide to offset the impact of lower net interest income. We have made further progress on cost, with our operating cost down 7% and our cost income best-in-class now below 50%.

In summary, we have delivered against the priorities we set out early this year and where we are now is time to look at the future and how to drive the creation of faster value. So Page 3, we have committed to delivering value to shareholder and through developing and implementing a new business plan, the process of revolving and delivering the business plan, which we expect to develop by spring 2014 will be including and will drove all the experience and expertise of the group and my colleagues.

We will develop both strategic guidelines and simple achievable concrete action plans, that would allow us to achieve our main goal, which itself is remarkably simple, to deliver a return above cost of capital both at group level and for each of the business unit. Page 4, the executive summary but I will go on the sound economic performance.

So, net income at EUR640 million of which EUR218 million in the third quarter. Net interest income stabilizing, sustained increase in net fees and commissions, continued aggressive reduction of structural costs, improvement in operating margin and conservative stance on provision.

What it is very important, it is also the rationalization of equity holdings underway because we sold Assicurazioni Generali stake with a net capital gain of EUR82 million in fourth quarter 2013. So Slide 6, on this page you come up to see that our solid capital base is further strengthened and so we increased our Basel III common equity ratio for an amount that could be equal to around EUR2 billion of capital increase and EUR6.6 billion increase adding in mind the amount of our capital idea in 2011.

So we are now at 11.5% of common equity, including 30 basis points of the so called Danish compromise. Core Tier 1 ratio, not considering new competition rules of insurance related assets is 12.1 and the Core Tier 1 ratio considering the new competition is 11.5.

Slide 7, we consider an absolute priority to pay dividend. So we have accrued 208 of per quarter dividends also in this quarter.

The dividend payments remain so an absolute priority for management and these subject only to developments in the environment in the regulatory rules and measures. Slide 8 we are best in class looking at common equity position and so we are now again a leading bank in Europe.

This level is 200 basis points above the Basel III compliance level for global SIFI. Slide number 9, also looking at the leverage; we are best in class in Europe.

Slide number 10, looking at credit trends where we are seeing improvement in the inflow from performing loans year-on-year and the stabilization quarter-on-quarter. So Slide number 11, we decided to build up an additional provisions buffer providing confidence ahead of the upcoming ECB compressive assessment, our opinion is that the assessment will be very tough.

And so we will be ready for a very tough exercise. So now our coverage is 44.5% and increased also the coverage in the performing loans.

So last quarter we used the generic reserve. This quarter we increased the generic reserve.

Slide number 12, the coverage of our NPL is well above 100% and especially looking at doubtful loans is 123%. Liquidity Slide 13, so liquidity is a real point of strength of the Company.

So no comments on this slide. Slide number 14, the loan to deposit ratio, 96%.

Slide 16, so we can enter into the economic figures. The nine month waterfall analysis on this page highlights the quality of our results, despite a very prudent provisioning.

So operating income is set as 12.4 billion down 7.7% but only down 4.2% on a like for like basis excluding capital gains from London Stock Exchange stake disposal and buybacks that took place last year. The net interest income is being significantly impacted by the decline in market interest rates and by our strengthening of the liquidity position.

Fees and commissions went up 13.9%, best in class in Europe. Profits on trading are up 11.6% excluding non-recurring items.

Insurance is well within line with the same period last year and personal and administrative costs continue to reduce a significant reduction, so reflecting aggressive cost management. Operating margin is at 6.2 billion, down 8.4 versus last year but down only 1% when you exclude extraordinary items mentioned above.

Loan loss provisions of EUR4 billion reflect our rigorous and conservative approach which as demonstrated in previous slides has been announced in view of the upcoming ECB assessment. Pre-tax income stands at EUR1.8 billion which includes impairments of EUR280 million; net income EUR600 million.

Slide number 17, in the third quarter all business units showed positive contribution to both operating income and pre-tax income. We can comment line by line in the next slide.

So we can go to Slide 18, net interest margin, that’s a lot of interest on the dynamics of our net interest margin. So you can see that in this quarter the net interest margin is rolling above 2 billion mark but our pricing efforts are driving positive quarter on quarter revolution of client driven net interest income.

So you can see that the reduction in volume quarter on quarter is more than compensated for by the additional spread that we have been able to demand as promised in the last conference call. The impact of hedging activity, it uses the overall net interest income but also looking at hedging facilities, we are in line with what we promised in the last quarter.

So looking at Page 19 net fee and commissions; income from net fee and commission has increased 11.3% and for the nine month period, the increase is nearly 14%. Slide number 20; we are the leader in Europe.

So we are for sure best in class compared with our European peers. Slide number 21, another real point of strength in Intesa Sanpaolo that is the aggressive cost cutting, the reduction is 7% and it is 466 net cost reduction 7,000 staff reductions in the past 21 months.

Page 22, also looking at cost side we're best in class in Europe. Slide 23, we are also best in class at looking at cost income ratio.

Only another bank is better than Intesa Sanpaolo. And Slide 24, looking at provisions we continue to have a very conservative stance on provisioning.

This point, if you look at page 25 is a source of penalization for our result, because we have a tax rate of 49.4% and so we are probably twice the peers average that is 25%. Slide 26, the performance is better than competitor in operating income to tangible assets in cost income but worse in net NPL or loans.

It's due to our Italian credit environment, to very conservative stance of provisioning and also on our business mix that in this phase of the market is giving benefit to the most, to the really corporate investment banking oriented bank. So we can go on the next steps, which I'll be very interested in talking about.

This is the business plan. So we want to discuss also the way in which we develop our business plan and especially the values on Slide 29, the principles on which we really tie our business plan work.

Maybe geography fairness simplification, efficiency independence, independence for us is very important and we want to maintain the autonomy and independence. Slide 30 is the initiative already launched ahead of the different business unit and the business plan.

What for me it is very important is to go to Page 31, in which we can talk about simplification in Banca dei Territori. Banca dei Territori is really very important business unit of the group, the one with the higher potential to be exploited.

And as you know early this year I was appointed Head of Banca dei Territori by ISPs new Board, the division which represents the banking core of ISP business has undergone a lot of changes in the last couple of years, and has also suffered from a very tough external environment. So my sincere belief is that the only possible solid foundation for a successful launch of Banca dei Territori is to build a new and strong sense of identity shared by employees at all levels.

That's why in full cooperation with the seven regional managers and through a bottom up approach, we've developed a very sharp action plan and already launched several initiatives with immediate impacts. Banca dei Territori is in the best position to fully explore the significant potential coming from the well-known unexploited areas of the Italian Banking sector, as well as from better serving our client base and from possible improvement in the Italian microenvironment scenario.

So the key pillar of the new Banca dei Territori action plan is simplification, which drives both additional efficiencies and higher effectiveness. Simplification is being fostered at four levels; simplification of the quarters leading to increased effectiveness in the decision making processes, simplification of the network, simplification of the legal entity, simplification of the branch footprints.

So we can move to Page 32. This is a simplification in Banca dei Territori Headquarter.

We used to have 22 direct reports to the head of Banca dei Territori, not even considering the regional managers. Now we decided to reduce this number from 22 to 6, with greater empowerment and higher coordination on the ground.

Page 33, we made also simplification of the network. The new structure empowers regional governance in control centers with regional manager acting as general managers on the ground.

So the duplication created by multiple overlapping local headquarters has been removed with local offices, the so called area focused much more on servicing clients on commercial activities and also provision and support consolidating in the regional offices. So going from one area, we'll also be serving these corporate clients with turnover up to EUR350 million.

This leads to the reduction of 300 support function units to 100 only, with many resources that are freed up and will be relocated to services clients. The third point is simplification of legal entities.

Simplification of legal entities Page 34 applies both to local banks and product factories and drives synergies and faster decision making. On local banks, we have a clear roadmap to significantly lower the number of banks.

Seven of our product factories are being rationalized into just two. We will merge two factoring companies into major factoring and all the leasing entities will be merged with creditors [indiscernible] creating the new entity focused on leasing specialized finance and advisory services.

Page 35, we’re growing through a simplification of branch footprint. An additional very important decision we made is faster simplification of our branch footprint.

So on top of the 70 branches that we already closed or consolidated in 2011 and 2012, we have decided to shrink the network by an additional 800 branches. So 410 already delivered, and 390 to be completed within June 2014.

500 branches are already open until 8 p.m. and on Saturday morning and 250 also over lunchtime.

Now going to the conclusion, this has been nine months of progress of Intesa Sanpaolo, which we can build further in 2014. So solid balance sheet further strengthening, sound economic performance in a challenging environment and we launched major change in these initiatives specifically in particular Banca dei Territori.

Dividend payment is a clear our priority with per quarter dividends already accrued and ISP well prepared for the ECB comprehensive assessment and we have our new business plan under development. So thank you listening and I will do my best to answer any questions you may have.

Thank you.

Just a couple of points that I wanted to clarify. When looking at your loan portfolio, the average decline over the last 12 months is around 7%.

You do mention that there are some areas where there is some business recovery mortgages, some medium term corporate lending. When do you think the recovery will allow you to at least no longer see a decline in your total loan book or do you have more areas that you still want to reduce, looking in 2014?

Also one question on net interest income, and I’m really trying to understand here, there is a lot of debate now, the LTRO might not be renewed at the end of the year. There is more attention to the quantity of sovereign bonds in bank’s portfolio.

So gradually that is becoming a little bit under scrutiny. I am trying to quantify, what could be the impact?

What is contribution to your net interest income of the increased bond portfolio that you’ve had since the LTRO, perhaps partly founded by the LTRO, and if I’m looking, don’t know whether or not make sense to you, compared to what you have now versus before the LTRO period, you have increased your portfolio of around 25 billion. The spreads of the time when you bought it likely in early 2012 is probably -- the yield is like higher and then what it is today for similar maturity bond and I think your maturity, you always said was by three years for sure.

You’re looking at 2000 basis point impact which is on 25 billion, close to 500 million if you want implied benefit, your net interest income that if you effectively have to repay everything or dismount by end of the year or into next year could be eroded. Is that a correct way to look at it?

Is it too much or how should we consider this? Very quick point on dividend.

You mentioned obviously high focus subject to developments in regulatory rules and measures. Is there anything that you are aware of at the moment that could impact that?

So starting from the last question, I’m not aware of anything at moment that can create a problem in our dividend policy but keep in mind we’re under asset quality review process. So it is difficult to say what could be in the next month.

So looking at the loan portfolio, we are doing an EVA positive selection on all our clients. So we will increase our loan portfolio with the opportunity of increasing the EBA positive because you see that in the last quarter we increased the quarter one, the common equity and also with a flattish dynamics in the net interest margin.

So EBA contribution is increasing. So my position is that we can increase loan portfolio only if we will have EBA positive contribution, not just for the sake of being an increase in net interest margin.

The increase has to be found through the re-pricing, because re-pricing is something that we are doing that we will continue to put in place. The gap with the market towards in the range between 50 and 60 basis points is now 45 basis points and we want to go to zero for the first part of next year.

So re-pricing is for me the attitude that we have to have within the companies. Then looking at volumes, in my opinion we can consider that in this quarter we can have a flat or a slight reduction but starting from next year we can have an increase also in loan volume.

Then looking at the LTRO government bonds, and so you probably, I passed the slide with the liquidity but we had made the reimbursement of another EUR3 billion of LTRO, because we paid back another EUR3 billion. We decide to stop the repayment because my intention was to repay a higher amount but with the reduction in the ECB rate, I want just to be sure to compare the cost with our commercial papers fundings.

But our point is that we will reduce our ECB LTRO exposure. Then the contribution to the net interest margin is EUR60 million by quarter.

So the one that we made with the LTRO at the beginning of, starting from the beginning time of the LTRO, the government bond portfolio, in my opinion we will not have a significant reduction in the contribution in 2014.

That is correct. The [indiscernible] actually probably will not reduce that much but it could be a reduction more from 2015.

And was the number that I was looking at, so a potential loss?

Sorry Franciscka, but you know that we will present a business plan. So I can elaborate on 2014 but if you want to elaborate on 2015 and ’16 it is better to wait until next spring and I will give you all the details on all the different items, because the business plan will be analytics in all different items for business.

You’ll need four products and four class of single assets.

I understand. So just to reverse it, if I were to say that that increased portfolio, perhaps as profitability and only just from the spread on the asset side of 500 million higher, than what it could be replacing it today, what you will replace perhaps in different ways.

So I take your point and looking forward we will see, would that be a descent ballpark or is it too much?

The point is that that also the figures are very high. So it is not EUR 500 million but it is in any case is a significant contribution.

But in my view, we will in any case to maintain a portion of our liquidity in government bond. And the point is that spread between [indiscernible] used also in the future but the interest rate in my opinion will increase.

And so you cannot be sure that you will lose contribution.

I just have two questions. One on the [indiscernible] you had on the asset quality review.

You’re clearly preparing for that the hard way with the leverage provisions and I will consider you’re very well positioned. But do you think there is a risk that having moved to phase in Basel III as opposed to fully phased, will give some relative advantage to banks which are less rigorous than you are in calculating the quarter one under the current rules?

And the second question is on the long standing issue of the Bank of Italy ownership and the stake if there is an additional color on timing, expected timing for any decision and also if there is any possibility that the buyback of the Bank of Italy on its own capital will come into play?

So looking at asset quality review, my position is that I cannot see any kind of risk, because in my opinion there would be an exercise with the level playing field attitude. So my view is that there would be no advantages for other competitors.

In any case our capital position is so strong that I’m not worried at all. Also if other will have an advantage on their capital position.

So, I’m really not concerned about the impact on the capital at all. So, looking at Bank of Italy, I have no news that can be added.

My position is that we will have a revaluation or we will decide to proceed with something related to our Bank of Italy stake, only if we will have a benefit on the common equity. Otherwise, no possibility for us to consider revaluation or other implication on Bank of Italy side.

Sorry to come back to it, but it’s another question on the upcoming asset quality review. And I guess a lot of the focus is been specifically around the loan book and the NPLs.

I’m just wondering whether you see any risks or you have any concerns from your other assets on the balance sheet stemming from the review? I’m thinking particularly in the context of your level three and reclassified asset holdings and also around sovereign bond portfolio.

And I guess just to clarify on an earlier question, I mean sovereign bond portfolio, we did see a quarter-on-quarter decline this quarter. Should we expect that to continue or are you saying that you want to maintain that holding constant going forward.

Looking at level three asset you have ask all other European banks. So Intesa Sanpaolo not worried at all at level three assets.

So for me it is not a problem. Looking at sovereign bond portfolio our very sure maturity, it is put us in a condition not to have any kind of worry relate to sovereign bond portfolio.

We made a reduction but what all was only because we decide to have profit on trading since there was an opportunistic way of looking at the portfolio. We would not increase our portfolio because portfolio is also related to our liquidity policy and so we do not need to increase the portfolio.

I would like to draw your attention on Slide 18, where you give us the breakdown between spreads and in volumes etcetera. The question is, I was wondering when do you think in your view the 35 will be more than able to compensate for 21 of hedge negative that we have seen.

So, in short words, if the combination of volume is spread at some point in your expected business plan during 2014 will become more positive than the hedging and what would trigger this one. Thanks.

This is a good point. Looking at the hedging so we can start from the hedging because the hedging will reduce the contribution in 2014.

In all the different conference call I gave the figures on the forecast for 2014 that was in the range between EUR800 million and EUR900 million. So, we can have a reduction in the hedging contribution from the hedging facilities.

But looking at decline driven, so the area of spread and volumes, my forecast is to have a strong increase in the spread contribution and a contribution also from the volume side. So, my forecast is that the combination of volume spread in 2014 will more than compensate the hedging reduction.

Which you’re telling us before that neither [ph] will be increasing in 2014, correct?

My forecast is that at the end of 2014, it is possible to have an increase in the net interest margin compared to 2013.

Just two questions, the first one. I saw that the total increase in gross impaired loans compared to last quarter was 2.4 billion, which I think is the biggest increase by going to back to 2010.

I was wondering whether there was any one off. And then number two, on Slide 96, I’ve seen the expected loss reduction from capital for Basel III has increased by 300 million.

Did you change the methodology for calculation or what did happened despite increase in NPL coverage?

Last question, we made the calibration of the probability that folds on the corporate clients, so increasing the expected folds area. The first question, I didn’t understand first question, sorry.

Could you repeat please?

The increase in gross impaired loans, which I think was 2.4 billion was much bigger than the last few quarters. So was there any specific one big position which you reclassified or is it many positions?

The point is that we have increased in past due. If you look at Page 17, you can see that past due for technical reason related to the last phase of September and an increase that now is under reduction and it is due to the past few dynamics.

But my position is that I think that we are now at a stabilization of the non-performing loans. I cannot say that we have an improvement but stabilization.

So the total stock you think is close to stabilizing?

So the total stock you think is close to stabilizing?

Total stocks, it could at a level of stabilization but it is difficult to say and so we have to wait until the end of this quarter. So please don’t ask me to make the what if analysis on what it is very complex.

So my position is that now we are in stabilization mode and it was unseen also in this month of October and the beginning of November.

I have a follow up question actually on the hedging, if you can clarify what kind of instruments or structures actually you have in place and if you are working on replacing some of the instruments which are expiring? And the second question is in terms of the net interest income, the calculations you have just made to Carlo on his question, how important is the cost of funding reduction in that kind of more positive outlook in 2014 for a spread volume type of analysis?

I have a follow up question actually on the hedging, if you can clarify what kind of instruments or structures actually you have in place and if you are working on replacing some of the instruments which are expiring? And the second question is in terms of the net interest income, the calculations you have just made to Carlo on his question, how important is the cost of funding reduction in that kind of more positive outlook in 2014 for a spread volume type of analysis?

So looking at hedging, interest rate swap are the main instruments. Cost of funding in 2014, we will have a reduction in the cost of funding.

Are these retail related or do you also expect actually a change on the funding mix, more retail less…?

Are these retail related or do you also expect actually a change on the funding mix, more retail less…?

It is a point related to funding mix; so mainly funding mix and then also on the different instruments line by line.

I have two questions. The first one related to your loan loss provision for the quarter.

You booked something like EUR1.5 billion of provisions. My understanding is that there are EUR100 million related to the increase in the performing loan reserve and something like 150 million for the 20, 30 basis points increasing the coverage of total impaired loans.

So the bulk of the batter of provisions for this quarter is in the region of EUR250 million. Is this calculation correct or is there something missing?

And my second question is on the business plan presentation. My understanding is that much of the focus will be on the restructuring on the improvement in the operating performance of the Banca dei Territori in which you see a story potential and wondering also whether you are, part of the plan would be, they voted also today, optimization of your network presence?

So starting from the business plan, the business plan will be comprehensive of all the different business unit because we have a very strong potential in all the different business units of our group. So it will not be only related to Banca dei Territori.

Banca dei Territori, we have already started with the process of simplification that we would be an engine for growth in 2014 and in the years of the business plan, but also in all other business unit we will make a specific business plan with purposes of coming back to create value and in each business unit, in which we would not create value we will go out from the business unit. Looking at loan provision, if I understood correctly, you were talking about the figures of provision in the range of EUR1.4 billion.

This is the amount that I consider the amount of reasonable for this quarter but the point is that if I can elaborate, I will make distinction between what could be a running rate that could be in the range between 130 basis points, 25, 30 basis points that is the running cost and the difference that these, the improvement of our coverage related to our very conservative attitude towards the ECB comprehensive assessment.

Hey, it’s Azzurra from Citi. I just have two quick questions.

One is on the risk weighted asset. We have seen again this quarter an improvement in the risk weighted asset.

Most of it seems related to lower lending but I was wondering whether you could show if you have any further optimization on your risk weighted asset that could continue to sustain your capital position which are strong at 11.5 in order to see what could be dividend potential be in the future. The second question is on the asset quality review.

It’s not a specific question, just to put a ring on something like you have strong level of collateral on your NPLs, and collateral is an area of debate, especially for the Italian banks coming into the asset quality review. Do you have in mind or do you have any thoughts on how the ECB could treat collateral in the upcoming review next year?

Hey, it’s Azzurra from Citi. I just have two quick questions.

One is on the risk weighted asset. We have seen again this quarter an improvement in the risk weighted asset.

Most of it seems related to lower lending but I was wondering whether you could show if you have any further optimization on your risk weighted asset that could continue to sustain your capital position which are strong at 11.5 in order to see what could be dividend potential be in the future. The second question is on the asset quality review.

It’s not a specific question, just to put a ring on something like you have strong level of collateral on your NPLs, and collateral is an area of debate, especially for the Italian banks coming into the asset quality review. Do you have in mind or do you have any thoughts on how the ECB could treat collateral in the upcoming review next year?

So no optimization in the risk weighted assets in this quarter. So only volumes effect in this quarter.

Looking at the asset quality review, collateral is a strong area of concern, not only for the Italian banks but for all the European banks because for the first time at European levels, all the collateral will be considered into the analysis of all the central banks. So it will be the timing in which we can have a level playing field and not only looking at Italian banks as a worst in class in Europe.

But I have no information on what could be the analysis on this point different from the one that all in the market know.

On the first question, my question was more after not just in this quarter, including this quarter I understand it was mostly on volume, it was more looking forward into 2014.

On the first question, my question was more after not just in this quarter, including this quarter I understand it was mostly on volume, it was more looking forward into 2014.

For sure in the future in we'll have optimization. It is something like a business unit for us to operate in such a way to mitigate the increase in the risk weighted asset.

I had two questions. The first is on the asset quality review stress test.

Do you think that could start any consolidation of the smaller banks and is that a scenario you would look to take part in? And then the second question is regarding the LTRO, are you expecting a second or replacement LTRO?

Do you think the Italian banking system needs a second LTRO?

So my opinion, there could be a consolidation within the smaller banks, absolute no interest of Intesa Sanpaolo in taking part of any kind of consolidations in Italy and in Europe. Second point, LTRO, Italian banks I don't know.

So Intesa Sanpaolo not for sure. We will repay our LTRO and so we will not need any kind of second LTRO.

For the Italian banking system, I am sorry but I don't know the answer.

Three questions; the first on the fiscal treatment of provisions. What impact would you expect from the alleged change in the treatment, fiscal treatment of provisions in Italy on your P&L and on your balance sheet?

The second is on industrial stakes. After the Generali placing, what other stakes do you consider selling in the near future, if any?

And thirdly on the bank of Italy stake following Matteo's question, do you see any potential problem for European authorities to validate the potential capital benefit arising for Italian banks from the stake reevaluation.

Looking at fiscal treatment, my opinion is that now we have 50% tax rate. If there would be some reduction in this fiscal treatment we will be very happy but figures, I want to spend figures only if there will be approval of the ledger of stability.

Do you expect any capital impact as well or only -- would you expect also a capital impact or only a P&L impact?

Only a P&L impact. Second point, industrial stake.

Generali was in a position of a capital gain and so we decide to sell. This is my position.

Whenever I have the possibility capital gain and to increase value for shareholders, we will sell the stakes. So we have no industrial stake, we have stake that we can make dispose of in the market.

At the moment we can have other industrial stakes but we will tell only after having completing the disposal. Third point Bank of Italy, the point of Bank of Italy is that in my opinion the only way of having the possibility of having a competition in the capital is to guarantee a market for the Bank of Italy’s stake.

So only if there will be the possibility of considering disposals, there will be the possibility at the European level to be considered as capital.

Hi, good afternoon. In the last quarter result in Q2, you said that you repaid EUR12 billion of LTRO, which is one related and funded by the state bank guarantee bonds, and you’re in negotiation with Italian government in order to anticipate the repayment.

Would you give us an update on that and also what could be the impact on your top line, if you’re able to anticipate repayment on these bond? Then sorry, I have other two questions.

The second question is, I think it’s barely three years that you can leave without second LTRO, but as you rightly pointed out before, I’m not sure about the rest of the other, the rest of the Italian bank system. So I would like to ask your opinion about the possibility, how do you see the chances of another LTRO and maybe of a longer duration and the one that was seen previously?

And finally my third question is two years ago we heard that the savings shares are an efficient part of the capital structure. Three years have gone by and we haven’t seen any action taking place on the shares.

Now without anticipating anything that you or may not want to do on this, but would like to have your opinion on the efficiency of having this instruments on the balance sheet?

First question related to the state bank guarantee, we are still in negotiation and the total amount could be in the range of EUR90 million of benefit. I hope that the negotiation will be completed within the year.

LTRO long maturity, the position of the bank is clear, so no need. I think that probably there could be another, LTRO.

I will be worried about the position of the bank that will be addicted to the ECB. So my opinion is that it is better not to have long duration and long maturity LTRO, otherwise banks will be addicted to ECB.

Then, third point is saving share - nothing about saving share.

I have just two questions. One on commission, I saw a slowdown in the third quarter in terms of growth year-on-year.

I was wondering if you’re thinking to change the strategy in the short term, trying to increase by deposits rather than indirect deposits? The second question is on capital, you’re increasing quarter by quarter your capital ratio.

I was wondering what capital ratio target you have in mind?

So looking at commissions, it is only a seasonal effect but starting from this fourth quarter commission, we will start again to grow. So our expectation is growing again in commission also quarter-on-quarter.

Looking at capital, capital position and the real target of capital is if you consider asset quality review 8%, SIFI 9.5%. In any case, we would be in clear excess of capital also after the stress test of the ECB.

Nobody asks so I would ask. Can you maybe anticipate some of the cost savings attached to the reorganization of the network and where the big part is coming from whether, is it simplification of your quarter or the legal entities?

Probably because your colleagues will like to listen to business plan presentation and not to have anticipation of the real figures of the cost saving, but in any case my opinion is that we will have a significant contribution from the reduction in cost driving from the closures of the branches and all the other administrative expenses that are related in having a lot of complexity. What it is very important, that these measure are not only cost measures but are also revenues measures because we will use people in the ground to better serve clients and so to increase revenues.

But let me talk on this point when we’ll have the presentation of the business plan.

Just a follow up on this, do you think that in another year of top line progression you can repeat the same performance in terms of cost that you’re going to have this year?

Minus 7%, it is something like mission impossible. So please if you can see that we are already a bank with a 49.8% cost income, not having South America, not having other areas of growth in the country, in the world I think that we are a unique bank looking at cost income.

So if you reduce again 7%, you can go to a cost income of 45%. That is something that doesn’t exist nature.

So it is possible to reduce again cost but having in mind that we made a very strong work on the cost in the last five years.

So in minus, this is what you have in your mind?

Yes, absolutely minus.

Good afternoon. This is Adrian [indiscernible] from Royal Bank of Canada.

I have one additional question, if I may. Clarifying an earlier question on re-pricing, you mentioned that you wanted to reduce the 45 basis points gap to peers to zero by early next year and what proportion of your loan book does this supply to?

And is there lag before the new pricing becomes effective?

It applies to EUR90 billion of our short term loans and during 2014 we will have EUR30 billion of medium term loan expiring.

So I want to thank you for your attention and we will be in touch during this month and we will have the Business Plan Presentation in spring 2014. So thank you very much.