Banca MPS's 2022-2026 Strategic Plan was approved by the Bank's Board of Directors on 17 December 2021, replacing the 2021-2025 Strategic Plan (approved in December 2020), which had been drafted on the basis of a structural solution to be implemented in the short term.
The 2022-2026 Plan confirms the size of the capital increase already estimated in the previous 2021-2025 Plan in the amount of EUR 2.5 billion, for which it is reasonable to expect the support of the main shareholder.
The Plan is currently undergoing the necessary communication, approval and regulatory processes that the Bank has undertaken with the European Central Bank, the Single Resolution Board and DG Competition. Furthermore, the Ministry of Economy and Finance is in talks with DG Competition regarding its shareholding in the Bank.
The positions of the Authorities are a prerequisite for the capital strengthening transaction envisaged in the Plan; it is not currently possible to provide a precise estimate of the time required to complete the Plan authorisation process.
The Plan, which is the basis for the start of the above approval processes, may, however, have to be amended and changed, even significantly, to reflect the outcome of discussions with the relevant Authorities.
The strategic objectives of the Plan provide for:
- Discontinuity of the business model to establish the foundations of a new, leaner MPS.
- Radical simplification of the Group's operating model and structure.
- The continuation of the Bank's de-risking and resilience process.
- Value generation that allows for adequate shareholder remuneration.
For each of these strategic guidelines, priority has been given to initiatives that:
- Create value from as early as the first year of the Plan and will be fully phased in by 2024.
- Are under the control of the management, thus reducing execution risk.
- Seize the opportunities offered by the NRRP and the Agenda for Sustainable Development, minimizing capital needs, including through partnerships.
The strategic objectives of the Plan are based on the following 3 pillars:
- Refocusing towards "core" customers (households and SMBs), leveraging the opportunities offered by the NRRP.
- Radically simplifying the operating model, bringing it closer to customers through the network.
- Digital roadmap investments focused on well-identified initiatives to ensure successful execution.
Plan projections are based on a number of assumptions, including a EUR 2.5 billion capital increase to be executed in 2022, allowing for approximately EUR 800 million in IT investments, approximately EUR 1 billion in restructuring costs and full compliance with the 2020 Stress Test and current MREL requirements.
The Plan includes initiatives to support growth with immediate and tangible transformation efforts that will lead to steady profitability and capitalisation benefits:
- Cost-income ratio below 60% by 2024, with additional reductions in subsequent years.
- Cost of risk of approximately 50 bps, in line with the Bank's asset quality.
- Pre-tax profit of approximately EUR 700 million in 2024.
- ROTE of approximately 8.5-9% in 2024, approx. 11% in 2026.
- Fully loaded CET1 ratio above 14% in 2024 and approximately 17.5% in 2026, before dividends and before the positive impact of DTA reassessment deriving from the Plan.
For further information, please refer to the press release of 17 December 2021.