BMPS 2Q19 Results 1 August 2019 Key takeaways Acceleration of NPE - PowerPoint PPT Presentation

BMPS 2Q19 Results 1 August 2019

Key takeaways Acceleration of NPE reduction created conditions to reach targets two years in advance, with no further expected economic impact Resilient revenues despite MPS downsizing and macro/interest rate uncertainties All capital ratios above SREP requirements also on a fully loaded basis Ongoing implementation of the funding plan with successful access to wholesale funding market 2

Highlights of 2Q19 Results Pre-provision profit Co Cost of of ris isk Net income Ne EUR 169mln Cost of risk at 57bps EUR 65mln Impacted by the release of provisions following the EUR 218mln excluding EUR -49mln Including non-recurring contribution to BANKIN ING INDUSTRY unwinding of Juliet agreement, the cost for the costs for the unwinding of servicing systemic funds (EUR -27mln) and additional revision of the NPE strategy and the annual update agreement with Juliet provisions for new customer filings related to of credit risk parameters diamonds (EUR -41mln) Gross NP Gr NPE ratio CE CET1 Li Liquidit ity ind ndicato tors c. 14.6% 14.0% (transitional) 201% LCR** (including disposal under IFRS5) 11.9% (fully loaded)* 113% NSFR BANKIN ING INDUSTRY EUR 22.9bn Tot Total Cap Capital Revised NPE strategy: (including EUR 0.3bn T2 issued in July) c. 12.7% at YE2019 Unencumbered Counterbalancing Capacity 16.0% (transitional, stated figure 15.5%) (17.4% of total assets) 13.9% (fully loaded)* 3 * Including expected reversal of DTAs until the end of the transitional period, proforma fully loaded CET1 ratio at 12.3% and fully loaded Total capital ratio at 14.3%. ** LCR calculated taking into account clarifications provided by supervisory authorities.

Resilient revenues thanks to continued focus on commercial activities Resilient revenues Downward pressures … … offset by: Increasing network productivity thanks to the ✓ MPS downsizing: branches  Quarterly evolution of revenues and PPP (€/mln) Revenues PPP new distribution model -4.3% and headcount -4.5% vs. Jun-18 Successful partnership with AXA: ✓ 809 803 795 More adverse  769 ▪ commercial development of the «health» macroeconomic scenario business line BANKIN ING INDUSTRY (downward revision of ▪ BancAssicurazione project: dedicated AXA- 248 233 2019 Italian GDP growth 218 MPS BancAssicurazione graphical elements 134 forecast from c. 0.5% to and specifically trained insurance product c. 0.1%**) managers in branches. Pilot phase until the Challenging interest rate end of the year, progressive roll-out  environment starting in Jan-20, implementation in first 3Q18 4Q18 1Q19 2Q19* 600 branches expected by June Commercial activity New mortgages (€/bn) Commercial direct Retail mortgages Current accounts & time deposits (€/bn) ✓ ✓ almost flat YoY funding stock (current Corporate 65.6 2.6 2.4 64.1 Retail*** accounts + time Selective lending ✓ 62.0 1.7 deposits) increased by BANKIN ING INDUSTRY strategy to corporate EUR 1.5bn in the customers 0.9 quarter, mainly driven by retail customers 4Q18 1Q19 2Q19 1H18 1H19 * 2Q19 revenues and Pre Provision Profit net of EUR 49mln costs for the unwinding of Juliet servicing agreement. 4 ** Source Prometeia: GDP growth estimates for 2019 revised from 0.5% (December 18) to 0.1% (June 2019) . *** Including small-business mortgages.

Potential acceleration of NPE deleveraging Incl ncluding NPE evolution in 1H19 ( €/bn) fur urther EU EUR 2. 2.0bn bn NPE disposals ls -0.4 16. 16.8 -0.5 15.9 15. Expe Expecte ted -1.2 -0.4 -0.4 Gross NPE 13. 13.9 rati tio o at 12. 12.7% UTPs Bad loans NPE stock Gross NPEs Deconsolidated UTP Gross NPEs UTP Disposed leasing Bad loans Gross NPEs at 31/12/2018 bad loan portfolio disposals/ at 30/06/2019 binding bad loans portfolio binding at 30/06/2019 (including leasing reduction offers received to be deconsolidated offers received proforma portfolio) Gross NPE 17.3% 14.6% 16.3% rati tio c. EU EUR 2b 2bn NPE E dispo posals ls ongo ongoing g & & to o be e dec econsoli lidated with th P& P&L impa pacts ts already boo ooked d in n 1H 1H19 9  EUR 1.6bn UTP reductions/disposals in 1H19  In 2Q19 binding offers received for EUR 0.4bn bad loans  The unwinding of the ten-year servicing agreement with Juliet S.p.A. allows the Bank to have more flexibility in the deleveraging of NPEs and to to reach th the Res Restructuring pla lan targ targets tw two ye years in in advance, with no no exp expected addit itio ional co cost st 5

NPE deleveraging: results achieved vs Restructuring Plan target  EUR 8.9bn NPE disposals/reductions completed by FY2019: Total 2H19 2018 1H19 2020 - 2021 ✓ well above the original 8.1 Restructuring Plan target for 2021 Disposals/reductions envisioned by Restructuring Plan (€/bn) (including 4.1 2.0 2.0 Including (EUR 8.1bn) interest on arrears) €0.4bn arrears ✓ achieved 2 years in advance Disposals/reductions 8.9 * 2.0 - 5.0 1.9 completed/planned by FY2019 Excluding  The additional cost for the (€/bn) (excluding interest on arrears) arrears acceleration of the disposal plan (EUR 2bn disposals in 2H19) already 920 IFRS9 FTA funds used (€/mln) 660 - 260 booked in 1H19 results and funded by the release of provisions following the n.m. 248 - 248 - Additional cost (€/mln) unwinding of the Juliet agreement 6 * Disposal of leasing bad loan portfolio for EUR 0.8bn and of UTP portfolio for EUR 0.2bn included in 2018.

Capital position above SREP also on a fully loaded basis CET1 ratio (%) Transitional CET1 Total Capital ratio (%) Transitional TC Fully-loaded CET1* Fully-loaded TC* Buffer of Buffer of c. 250bps 16.0 c. 400bps vs. SREP 14.0 13.3 14.7 vs. SREP 13.9 11.9 13.5 11.2 12.6 10.0 31/03/19 30/06/19 SREP 2019 31/03/19 30/06/19 SREP 2019 Proforma including EUR 0.3bn T2 issued in July  Sound and improved capital ratios, above 2019 SREP Overall Capital Requirement (including Capital Conservation Buffer of 2.5%) also on a fully loaded basis  CET1 at c. EUR 8.2bn (EUR +0.3bn QoQ) due to the positive contribution of 1H19 earnings**, the cancellation of the indemnity related to Fresh 2008 and FVTOCI reserves  RWAs are down QoQ by c. EUR -1.3bn, mainly driven by credit risk (c. EUR -1bn, partly from deconsolidation of MP Belgio) BMPS BM S is s not t par participating in the EB EBA 20 2020 EU EU-Wide Stre Stress Tes Test*** * Including expected reversal of DTAs until the end of the transitional period, Fully loaded proforma CET1 ratio at 12.3% and fully loaded total capital ratio at 14.3%. 7 ** CET1 ratio calculated including result for the period, subject to authorisation by the supervisory authority. *** As per EBA’s 2020 EU-Wide Stress Test Methodological Note, BMPS is not included in the sample of participating banks as it is subject to mandatory restructuring plan agreed by the European Commission and was not assessed to be near the completion of the plan .

Agenda  2Q19 Results  Details on 2Q19 Results  Focus on Asset Quality 8

2Q19 Results  Pre-provis isio ion profit at at EUR 169mln (EUR 218 218mln excluding the EUR 49mln Juliet servicing agreement P&L (€/mln) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 unwinding costs), with: ▪ NII impacted by pressure on rates, mitigated by Net Interest Income 421 449 442 431 409 404 increased average commercial loans Fees and commissions 407 403 353 360 359 364 ▪ Fees & commissions increase driven by recovery in WM placement and payment services; solid WM Financial revenues* 57 -14 17 1 43 42 Including continuing fees structure confirmed EUR -49mln * costs for Other operating income/expenses -8 -5 -3 -24 -8 -63 unwinding ▪ Costs affected by increase in other administrative of Juliet agreement expenses (mainly related to credit recovery and new Total revenues 877 877 832 832 809 809 769 769 803 803 747 747 projects) although personnel costs benefit from the latest Solidarity Fund headcount reduction (750 exits Operating costs -573 -581 -561 -635 -569 -577 in 2Q19) Pre-provision profit 304 304 251 251 248 248 134 134 233 233 169 169 Cost of of ris isk at at c. 57 57bps, positively impacted by the  release of provisions following early termination of the Total provisions** -138 -109 -121 -257 -164 -88 Juliet servicing agreement and negatively impacted by the NPE strategy revision and by the annual update of Net operating result 166 166 142 142 127 127 -123 69 69 82 82 credit risk parameters Non-operating items -55 -62 -86 -219 -92 -47 Net income at at EUR 65 65mln, including non-recurring  items: Tax expense/recovery 83 26 55 246 57 34 ▪ EUR -27mln for an extraordinary contribution to the Net income (loss) 188 188 101 101 91 91 -101 28 28 65 65 National Resolution Fund (NRF) and for the Voluntary Scheme Carige intervention impairment ▪ EUR -41mln additional provisions for new customer filings related to diamonds 9 * Financial revenues include: dividends/income from investments, trading/disposal/valuation/hedging of financial assets. ** Includes net impairment losses on financial assets measured at amortised cost and on financial assets at FVTOCI.