Good morning, ladies and gentlemen. Before I hand over to Magda Palczynska, Head of Investor Relations, a reminder that today’s call is being recorded. Madam, you may begin.

Good morning and welcome to UniCredit second quarter 2022 results conference call. Andrea Orcel, our CEO, will lead the call. Then Stefano Porro, our CFO, will take you through the financials in more detail. Following Andrea’s closing remarks there will be a Q&A session. Please limit yourself to two questions. With that, I will hand over to Andrea.

Thank you, Magda. Welcome and thank you for joining our second quarter results presentation. There is no doubt that we present today against the backdrop of an uncertain environment. We understand the concerns that you have about the future, but I want to highlight the following. Well, the facts we currently have do not point to extreme outcome for Russia or macro, we are well positioned should either one materialize as we will clarify throughout the presentation. In the second quarter, we delivered yet another set of excellent results, six in a row. This is across our entire franchise, both excluding and including Russia. Our commercial momentum has been strong. Our asset quality remains solid. And our cost management is disciplined with preemptive actions initiated last year paying off. Our model is now highly capital generative. We are tightly managing what is within our control and we are very satisfied with our results. With outstanding second quarter and first half results are best in a decade, we lay the foundation for us to accelerate our strategy, no matter the environment and enable us to improve our full year guidance. Our Russia exposure has been reduced further at limited cost and is under control from a capital standpoint with respect to any downside. Potential accelerated macro headwinds for Europe remain significant. Regardless of the outcome, we are better equipped than most to manage the macro shocks given our capital strength and conservative provisioning. During the second quarter, we completed the first 2021 share buyback tranche of €1.6 billion, equal to 7.4% of our share capital. And while we are vigilant on what lies ahead, we remain confident. As such, we have asked for the ECB approval on the remaining €1 billion tranche, which we expect to obtain in September and are calling an AGM to obtain shareholder approval to increase the number of shares to be purchased for 2021. We are maintaining our ‘22-‘24 guidance and are committed to delivering the UniCredit Unlocked distribution ambition of at least €16 billion under our slowdown scenario. We are also confident we can deliver most of this distribution in our recession scenario. We will – we are confident also that we will be able to deliver on the 2022 distribution in an amount of the same or more of 2021. We do not believe that the profound share price valuation dislocation properly reflects this positioning, our performance and our ability to withstand the shock. Let me now take you through in quick succession our Russia exposure, our positioning for macro, our overall results and the performance of our franchise. Our overall Russia exposure has been reduced by more than €2.7 billion at minimal cost. At the same time, we maintained our coverage ratio at 30% on a remaining higher quality portfolio. As a result, the conservative release of LLPs and reduction of exposure with associated RWAs generated 10 basis points of capital in the quarter. Net cross-border positions were reduced by €0.4 billion, mainly as a result of proactive discussion with clients producing early repayment at nominal value. If we look at our local participation, the subsidiary is robust and performing well. It has high liquidity, high capital position and resilient credit risk. Our increase in exposure is driven both by the ruble’s appreciation and exceptional organic capital generation in the quarter. Together, this generated a €1.6 billion increase in our net local equity, increasing group CET1 by 52 basis points. In combination, the cross-border exposure reduction and local participation contributed 62 basis points out of 173 basis points to the improvement in our group CET1 ratio for this quarter. On the extreme loss scenario, the widening of the residual impact on CET1 is more than entirely driven by the capital contribution from the local participation. At the same time, the impact of our exposure, so excluding the local participation, has decreased from around 40 basis points to around 30 basis points, thanks to de-risking. We entered the year with a very strong CET1 ratio of 14.5%, pro forma for the first tranche of a 2021 share buyback. This then declined to 14% due to the impact of Russia and the accrual of €400 million for the 2022 dividend, which was only partially offset by first quarter capital generation. We have now more than rebuilt our capital with a CET1 of 15.7% after accruing a further €500 million dividend for 2022. In the extreme loss scenario, which we continue to consider highly unlikely, our CET1 ratio will remain at a very healthy level in excess of 14.9%. This is well above our UniCredit Unlocked target range and much improved since last quarter. We continue to assess option for our local presence at the right condition and in line with sanction what’s continuing with our disciplined management. I will remind you that we have fully dealt with the capital impact regardless of the outcome and are focused on reducing our exposure economically and in an orderly manner, a strategy that has worked over the last two quarters. Let’s turn to Slide 4. We updated our slowdown scenario for our footprint, lowering the GDP growth assumption and increasing the inflation expectation for this and next quarter and next year. GDP forecast for this year is 2.4% lower than UniCredit Unlocked. Notwithstanding that, we are running above 3% in the first half of the year. All our indicators negatively affected by the high level of uncertainty continued to signal a slowdown and not a recession. Nevertheless, we do recognize that there is a significant risk to the downside. We need to look at both the true economic impact of the current issues such as the disruption to gas, food, commodity supplies and the way our clients, both corporate and families are preparing to withstand the shock hopefully supported by the expected government actions. We are confident that even in a recession our performance will be fairly resilient. Under the current hypothesis embedded in our recession scenario, our average cost of risk would be higher, but still relatively benign because of our sound starting asset quality, conservative provisioning and overlays kicking in. Our average organic capital generation over the plan horizon would decline to circa 100 basis points with net profit reduced. We could still confirm our 2022 distribution target of at least the same as in 2021 and expect to be able to honor the majority of our 2022-2024 distribution ambition. As you can see, what’s significant the impact of a recession with these characteristics is less negative than perhaps some believe. Please turn to Slide 5 as I take you through what we believe to be our line of defense to face the various macro scenario that could occur. Firstly, sound asset quality, provisioning levels both on NPE and performing exposures overlays and a business model delivering consistent profitability and capital, both stock and generation are crucial to how a bank is positioned as it enters a challenging macro environment. These things can’t be created quickly and certainly not while navigating external headwinds. You do have them or you don’t. NPEs. Our NPE ratio improved considerably and now stands at 2.8% growth and 1.5% net of provisions. Based on the EBA definition, our net NPE ratio is even lower at only 1%. We also have a more favorable NPE mix than peers. UTPs make up 70% and net bad loans are less than €1 billion, less than 2% of CET1 capital. Our performing exposure is of high quality, as underscored by our recent performance. We also reviewed our corporate and SME portfolio identifying both impacted by high energy costs and supply chain constraint, which we then further analyzed name by name. The high-risk exposure is at a relatively low level below 5% of exposure at default of this portfolio and equals less than 1% of our circa €450 billion of exposure at default on total enterprises and individuals. Additionally, we have reviewed the debt repayment capacity of our household, assessing the potential effects of inflation and higher interest rates and confirm its relative resilience. These are complemented by preemptive action, that include a refocus of commercial efforts, a more targeted approach to new business and frontloading of cost reduction without impacting business growth. Even faced with our recession scenario, our high overlay of about €1 billion would enable us to absorb a significant portion of the additional impact of LLPs. Let’s turn to Slide 6 for a second line of defense. UniCredit today has a CET1 ratio amongst the best in Europe, supported by resilient organic capital generation. Our organic capital generation has outperformed even our expectations, largely driven by net profit but also by RWA efficiency. This gives us comfort in our ability to deliver on sustainable, long-term shareholder returns without eroding our CET1 ratio. Our business model is much improved and is on an upward path across many key financial KPIs. In terms of net revenue growth, cost income, return on tangible equity and net revenue over RWA, the recent average is far superior to the average of 17 to 19 across every metric. It is worth noting that the first half of 2022 was much better than the second half of 2021 in terms of continued improvement. While we recognize the headwinds that we face, we are in an enviable position and are navigating thoughtfully. All of these translate into a very different UniCredit profile versus the past, providing us with considerably more resilience. Let’s turn to Slide 7. Please note that as per last quarter, we are presenting our financial results, excluding Russia, with further disclosure on Russia and consolidation in annex. Our focus on the execution of three levers, net revenue, cost and capital efficiency remains paramount. And on all three, we are showing strong progress. In the second quarter of 2022, net revenue reached almost €4.4 billion, up 12% year-on-year, driven by strong capital light high-risk return growth across the regions and low LLPs. Gross revenue still grew 5%. At the same time, the group cost discipline led to a 4% reduction in our cost base without compromising on revenue generation and controls. We displayed significant positive operating leverage, again, Q-on-Q in Q2 with GOP up 17% year-on-year. As a result, excluding Russia, we generated €1.5 billion net profit after AT1 or CASHES coupon or €2.7 billion in the first half of the year, the best in a decade. We are confident that we will exceed our target organic capital generation of 150 basis points for the year. If we include Russia, net profit for the quarter rises to €1.8 billion, reducing the loss from Russia after provisions to €600 million in the first half. During the first half of this year, our strong capital position and capital generation have enabled us to absorb the full impact of our Russian exposure, complete the first €1.6 billion 2021 share buyback tranche, accrued €900 million in cash dividend in for – in 2022, while increasing our CET1 ratio to 15.7% by the end of the second quarter of this year. This again highlights the strength and prudence of our high organic capital generation model that allows us substantial distribution even without reducing our CET1. Let’s turn to Slide 8. Our client solutions business leverages best-in-class products and services for corporates and individuals across our group, maximizing the benefit of our strong and stable client franchise. In the first half of 2022, client solutions generated an impressive €4.7 billion in revenue while reducing risk-weighted assets by €11 billion despite loan growth, demonstrating the capital-light strategy in action. The second quarter performance of corporate solutions was strong, up 16% year-on-year and only down 2% sequentially off an excellent first quarter. It delivered a 17% ROIC. Transaction and payment revenue is back to pre-COVID levels, thanks to cash management and trade finance. Client risk management continued to perform well as we supported our clients in managing their risk with elevated commodity and FX hedging as we navigate an extraordinary level of volatility. This shows the benefit of our diverse, higher value-added client offering. Individual solutions was only impacted by the market backdrop with revenues down 6% year-on-year and 11% sequentially, driven by lower funds and portfolio management revenues partly compensated by good growth in brokerage and custody, thanks to certificates and bond placements. Life and non-life insurance also demonstrated solid growth. The annex has further details about the quarter. Let’s turn to Slide 9. A cornerstone of our strategy is to unify while empowering our four regions: Italy, Germany, Central Europe and Eastern Europe to unlock the full potential of the group. This also brings us diversification benefits and the optionality to create value accretive profitable growth in multiple ways. Diversification still plays well in this environment as can be seen from our results. In spite of the uncertainty, first half results are meaningfully up year-over-year by any measure, highlighting the excellent work of our people and underscoring, but the specific strategic focus for our region is the right one. Each region delivered a double-digit ROIC also above their respective cost of equity performing strongly across our three levers. This also holds true for the second quarter. All regions took proactive action to compress RWA further, delivering capital efficiency. Italy and Germany deserve a callout as does Bulgaria, which executed the first securitization in the CEE region for UniCredit. Let me take you through each one of the regions, one by one. Italy, we carved it out as a standalone region, a reflection of its inherent potential, but was proven again this quarter. Net revenue growth continued in the second quarter, up 19.2% year-on-year and 13% half-on-half. Well-diversified fees mean that transaction and financing fees in the second quarter have more than offset a market-related decrease in investment fees. To address the latter, there has been a focused rebalancing of our offer towards assets under custody products such as bonds, leveraging our internal product factory. The momentum of our network continues unabated and the numbers reflect their motivation. The decision taken centrally last year with respect to conservative provisioning and frontloading of cost reduction have made the business much more resilient whilst providing a tailwind on LLPs. Cost income continued to decline demonstrating positive operating leverage, but there is always more to do, which brings me to the recent management changes. The success of Italy is critical to the success of our bank as a whole and all the results have been very good. It is clear that we need to move faster with Italy’s transformation in the areas of simplification, empowerment within clear metric, and digitalization, laying a stronger foundation for the future. We also need to position Italy to partner effectively with the rest of the group. This is why the Board decided to bring Italy closer to the group, with Remo Taricani supporting as my deputy. For those of you who don’t know him, Remo has been with UniCredit since 2007 as Co-CEO of Commercial Banking Italy since 2019 and Head of Network since last year. The decisions taken on Monday to streamline the management team and structure reflect the commitments that we made as part of UniCredit Unlocked specifically to our people. They are designed to remove unnecessary layers of management, provide clarity on mandate and direct reporting lines into Remo. We further empower our regional heads who really drive this business within a clear risk and compliance framework and ensure that we put our clients back at the center enabling our channels from large corporate to wealth management to client solution to provide direct, effective and best-in-class advice on solution, while closely partnering with our regions. Not only am I confident that these changes will demonstrate positive impact, but they also provide a clear and accountable management structure better able to navigate more challenging market conditions ahead. Germany. Germany has delivered the best second quarter net operating profit in almost a decade. ROIC at 13% is well above its cost of equity even without the tailwind from lower provision, which helped Italy. Revenues were boosted by client risk management as a result of hedging activity and also by net interest income, the result of both robust corporate loan volumes and better deposit spreads. At the same time, both investment and transactional fees slightly improved, supported by sales initiative and our Allianz partnership. We continue to drive down cost with rigorous discipline and further initiative identified to help offset the impact of inflation, for example, in real estate. Central and Eastern Europe. Both Central and Eastern Europe have delivered an impressive performance, delivering by growth in fees, a high degree of cost control despite a high ramp-up in inflation and solid asset quality. We have also benefited from interest rate increases. These regions have proven to be very resilient despite the impact on our crisis, thanks in no small part to the caliber and the teamwork of our teams on the ground. The digital transformation continues unabated across Central and Eastern Europe, delivering process optimization, lower cost and a better consumer experience. We have seen this translate into exceptionally strong new loan origination across all segments and products, of which a high proportion were originated digitally helping to reduce cost while maintaining our sound risk appetite. Fees across both in Central and Eastern Europe were buoyant with higher transaction and financing results although investment fees faced headwinds from market condition. I would like to call out Austria performance this quarter with a ROIC of 14.5%. It has seen a consistent improvement across all key metrics and whose continued operational discipline led to a significant improve in cost income landing at 56%. We are defending our overall market share in Austria and outpacing in retail, delivering a first half net profit of almost €300 million. It is the start of an impressive turnaround. Across our footprint, there are numerous initiatives in flight to position us for the coming economic slowdown and the expected impact of inflation, volatility, slowing growth on client behavior. We are focused on our product and ESG offering, maximizing our partnership, leveraging digital and driving capital optimization. On all fronts, we are stepping up the execution of UniCredit Unlocked, which has proven to work and laid solid foundation enabling us to navigate an uncertain macroeconomic outlook. With that, I will turn over to Stefano to go over the second quarter results in more detail.

Thank you, Andrea and good morning everyone. Let’s turn to Slide 11. Before I take you through the second quarter ‘22 results, please let me remind you that they are presented excluding Russia, consistently with first quarter ‘22. My comments are based on a year-on-year comparison that is second quarter ‘22 versus second quarter ‘21, unless otherwise noted. In second quarter ‘22 we produced an excellent net profit of €1.5 billion after CASHES and additional Tier 1 coupons delivering a double-digit return on tangible equity at 13%. We delivered positive operating leverage, with net revenue up 12% and cost down 4%. Other charges and provisions are positive at €61 million this quarter, benefiting from favorable outcomes of two legal claims. Key recent financial events include all shares of the €1.6 billion for share buyback tranche for 2021 have been canceled, highly accretive for EPS. We have proactively taken further actions to reduce our NPE ratio, signing an agreement with Prelios for the specialized management of UTP loans. Furthermore, the sale of €1.3 billion non-performing loan and €2 billion UTP loans contributed to about 80 basis point reduction in group gross NPE ratio to 2.8% in second quarter ‘22. Let’s now look at the P&L in more detail, starting with the revenue on Slide 12. Net revenue reached €4.4 billion in second quarter ‘22, up 12% versus second quarter ‘21. This reflects resilient asset quality and healthy commercial activity, with strong net interest. In second quarter ‘22, we generated €4.5 billion in revenue, up 5%, thanks to high net interest growth of 11% and fees up 1.2% versus a solid second quarter ‘21. Our capital-light strategy continues to deliver, driving high-quality revenue. Trading income was down 7% year-on-year at €0.4 billion in second quarter ‘22. Effectively, all is client-driven, in particular, supported by hedging activity and the fixed income currency and commodity results. Let’s turn to the next slide. Net interest income was up 7% quarter-on-quarter, mainly driven by higher loan rates and the investment portfolio benefiting from rising interest rates more than compensating the negative impact on deposit rates. Average Euribor 3 months was 17 basis points in the quarter. Commercial activity was solid, with the bank for credit still healthy in the quarter, albeit slower pace as clients more carefully consider investment decision in the current operating environment. Average client loan volumes relevant for net interest are up €3 billion in the quarter, mainly in Eastern Europe and Germany, while end-of-period loans are up €5 billion driven by Central Europe and Germany. Loan volumes also benefit from €4.6 billion in new ESG lending in the quarter as we continue supporting our clients during transition. Please keep in mind that the loan number, increased by about €11 billion as the leading subsidiary in Italy and Germany have been moved back in news from IFRS 5 and for sale. The numbers have been restated. Customer loan rates are up 8 basis points in the quarter, benefiting from higher interest rates. Loan rates are up across our regions, in particular, Central Europe. Higher interest rates drove the customer deposits rate 6 basis points higher quarter-on-quarter negatively impacting the deposit contribution to the net interest, mainly in Germany, where excess liquidity fee is the key feature and Central Europe, where rates were act faster. The BTP volatility is expected to have a limited impact on the funding cost given our diversified funding base and limited funding needs in both ‘22 and ‘23. Let’s take a closer look at our net interest income outlook and sensitivity on next Slide 14. Our rate sensitivity will help bolster revenues when we see spillover effect materialize. The expected interest rate increase will offer material upside to our net interest or provide an offset in the event of a slowdown in loan volumes. We have updated our managerial net interest income sensitivity introduced last quarter. On a cumulative 100 basis point ECB deposit rate hike, of which 50 basis point taken in July, a further 25 basis point by year end ‘22 and 25 basis points in the first half of next year, we would expect a positive impact to the net interest income of about €1.5 billion for full year ‘23. We also consider the current contractual TLTRO III reconditions and no remuneration on tiering. The positive impact in full year ‘22 is expected to be around €0.7 billion. This impact has increased from the previous communication mainly due to the different assumption in timing and size of the increase as well as stronger rate dynamics in Central Europe and Eastern Europe. After full year ‘23, the TLTRO III repayments reduced the net interest income sensitivity and we expect a positive run-rate of about €1 billion for the assumed impact plus 100 basis point rate increase. Our assumptions are conservative, as you can also see when you look at the current forward rates. In the event of additional rate hikes, the net interest income sensitivity for every 10 basis point progressively decreases in a range from €100 million to €80 million from 50 points to 100 basis points of DCB deposit rate. Above 100 basis points, we will need to see how client behavior and competitive dynamics develop. Let’s turn to Slide 15. Fees are up 1% year-on-year supported by transactional and financing fees more than compensating lower investment fees that were negatively impacted by elevated financial market volatility as expected. Remember, second quarter ‘21 was characterized by high level of fees, so we are up against a challenging comparative period. This demonstrates the benefit of having diversified fee streams that perform in a variety of conditions. Thanks to our fee model, we had a record first half of €3.5 billion fees this year, up 5% compared to the first half last year. Let’s look at the component parts of fees year-on-year development more in detail. Transactional fees were up 13%, thanks to current account, card and payment fees driven by client activity. Financing fees were up 3%, notwithstanding that capital markets, specifically ECM and DCM were negatively impacted by the volatility in the quarter, loan and guarantee fees and credit protection insurance in Italy more than compensated. Investment fees were down 8% as volatile and lower markets led to lower asset under management upfront fees, partially mitigated by better asset under custody fees, thanks to certificate placement. Insurance contributes around €0.2 billion and helped to stabilize investment fees. The overall contribution of insurance to fees is up 5% year-on-year. Let’s turn to Slide 16. Second quarter 2022 cost came in at €2.3 billion, down 4% year-on-year. For comparison, inflation in our footprint was over 7% in the first half of this year. Thanks to our relentless focus on cost efficiency and frontloading of key Unlocked initiatives, we managed to reduce our cost base even with inflationary pressure. The reduction was driven by both lower non-HR costs down 6%, mainly thanks to lower consulting fees and HR costs down 4% year-on-year, benefiting from lower FTEs in Italy and Germany, down 6% in both countries. Cost management remains a key part of any high-performing organizational culture. Our strategy is based on simplification and improving efficiency across the organization with the absolute cost reduction being driven by non-business-related efficiency. This is aimed not to impact our revenue generation capability which in the past suffered from retrenchment. Let’s turn to Slide 17. Cost of risk, excluding Russia, is low at 10 basis points in the quarter, thanks to resilient default rates, reflecting our rigorous risk approach. Risk management is the best rock of best-in-class banking, and we will not surrender there is discipline we have worked so hard to acquire in the last few years, while making sure that we still do the right up of business. The cost of risk in the quarter also includes our full annual IFRS 9 macro scenario update in light of the recent economic developments. We now use more prudent macro assumptions with increased macro provisions. In addition to that, we kept our overlay LLPs on performing loans broadly unchanged at around €1 billion. We released some overlays on the back of exposure reduction mostly compensated by proactive additional overlays, mainly on energy-intensive sectors. Let’s turn to Slide 18. Our underlying asset quality remains sound and will further reduce our NPA ratio as explained earlier. MP coverage ratio at 49% decline to the disposal of highly covered NPEs and mix effect as lower cover UTPs have a higher weight compared to bad loans. The expected migration rate in our slowdown scenario from UTP to bad loans is expected to remain relatively low and stable our over our plan. NPE coverage does not include overlays on performing loans, which come on top. In Italy, about €24 billion loans benefit from a government guarantee, which is about 30% of our Italian enterprise loan book. With our strong asset quality and overlay LLPs, we are uniquely positioned to outsource spillover effect, both in a slowdown and a recession scenario. Let’s turn to Slide 19. In second quarter ‘22, our risk-weighted assets, excluding Russia, stood at €298 billion, down €10 billion quarter-on-quarter, supported by active portfolio management measure of €6 billion and benefiting from €6 billion procyclicality leading to regulatory tailwinds. Risk-weighted assets related to our Russia participation have decreased to €15 billion and for total Russia, including the cross-border exposure to €18 billion, down €3 billion quarter-on-quarter, thanks to exposure, de-risking and optimization. While there could be potential future volatility in the Russian risk-weighted asset dynamic, this underscores our cautious approach in Russia in line with our commitment of gradually compressing exposure in order fashion. Net revenue to average risk-weighted assets at 5.6% in second quarter ‘22, up 0.7 percentage points year-on-year. Our business model is focused on capital-light profitable growth. Active portfolio management and official capital allocation remain a focus to manage risk-weighted assets and support organic capital generation. Let’s turn to Slide 20. The CET1 ratio came in at a very strong 15.7%. And up 173 basis points quarter-on-quarter, while accruing a €0.9 billion cash dividend in the first half of the year. We have already spoken extensively about the strong organic capital generation and the contribution of Russia. The volatility of the BTP had a limited impact of minus 5 basis points in the quarter, more than compensated by a positive 25 basis point impact from DBO, thanks to the rate movement. Our BTP sensitivity on capital is limited. A plus 10 basis point parallel shift of BTPs was spread is around 2 basis point impact on the fully loaded CET1 ratio. As mentioned before, leasing in Italy and Germany were moved back to in us, which had a positive 17 basis point impact on CET1 in the quarter. The corresponding risk-weighted assets are expected to be more than compensated by active portfolio management that allows us to achieve our risk-weighted assets and organic capital generation plan targets. This is evident in the risk-weighted asset reduction we achieved in the second quarter through securitization and other actions. And I will now hand back to Andrea.

Thank you, Stefano. As I said, UniCredit entered this phase with a sound business model and a plan focused on improving both profitable growth and organic capital generation. This is an enviable position to be in. While the environment remains obviously fluid with macroeconomic headwinds, we have not yet seen material spillover effects in our regions. The performance in the first half of this year was excellent, and we will benefit from a more constructive rate environment. Therefore, we now expect for the full year a net profit, excluding Russia, of around €4 billion after cases and AT1 coupons. This benefits from our higher net interest income guidance of around €9.2 billion, driven by the positive market rate development, which could be partly offset by leading lending dynamics as GDP growth slows down. Looking specifically, I have a third quarter has started. Investment fees, unsurprisingly, continue to soften on the back of market uncertainty and volatility. Commercial dynamic, meanwhile, indicate lending volumes are holding up, while we see the beginning of a deceleration. Demand is supported by enterprises while appetite from individual is slowing down. In the third quarter of this year, we expect investment fees to be further impacted by seasonality, while transactional fees should remain supported by tourism and inflation. Financing fees overall will depend on the evolution of lending. We expect total fees for 2022 to be broadly in line with 2021. Continued elevated financial markets volatility is expected to negatively impact investment fees, while transactional and financing fees should be influenced by economic development and client activity. We continue to expect costs in 2022 to be in line with 2021 as we limit inflationary pressure with disciplined cost efficiencies. Our cost of risk, excluding Russia, is confirmed at 30 to 35 basis points for the planned period. For this year, given the low cost of risk in the first half, we’re guiding to less than 30 basis points. As a result, for 2022, we expect net revenue above €16.7 billion. The group tax rate, excluding any potential tax loss carry-forward DTA write-up is expected to remain slightly below 30%. We will book the impact of a special banking tax in Hungary of around €40 million in the third quarter. This year, our organic capital generation is expected to exceed the 150 basis points plan ambition on an average per year. As we move into the second half of 2022 and assuming our slowdown scenario, we would be in a position to absorb the entirety of the expected 50 basis points regulatory headwinds. This will enable us to complete both our 2021 and our 2022 distribution subject to receiving shareholder and supervisory approval. While achieving a CET1 ratio of 14.2%, slightly higher than the comparable CET1 ratio with which we ended last year, and this is the substance of our capital generation and distribution. Six months into a 3-year plan, we are already delivering consistent positive outcomes by combining the three levers of net revenue, cost and capital efficiency. We remain confident on a return on tangible equity of 10% by 2024, a level that net of our excess capital, we are currently exceeding and of our ability to deliver attractive cumulative shareholder returns no matter the environment. Let’s turn to the last slide. We are delivering on our UniCredit Unlocked ambition and continue to exceed our targets. The second quarter and first half performance confirm we are on the right path with the right momentum. We are well prepared to navigate macro headwinds and even a shock. We already laid the groundwork for this environment with our capital strengths, our good asset quality are prudent overlays and provisioning. We have kept our cautious approach to risk, anticipating the impact of an economic slowdown in a thoughtful way, leveraging on our sound approach to the business. But being well prepared goes beyond this. It is also what we do for our communities and our clients, building for tomorrow. As part of UniCredit Unlocked, we embedded sustainability in our culture, and this is delivering real tangible results, whether through environmental and social lending of via targeted social finance and donation or by ensuring equal pay for equal work. We are keenly aware of the important role we play in supporting the real economy, and it is an unwavering focus of ours. The environment is changing rapidly and challenging times lie ahead. We approach them with a strong position in all relevant metrics and having taken preemptive actions. We continue to navigate with a united and determined team approach. Moderator, could you please open the line for questions?

Thank you. [Operator Instructions] The first question is from Azzurra Guelfi with Citi. Please go ahead.

Hi, good morning. I have a question, one on capital and one on asset quality and outlook. When I look at capital, your capital is very solid, you are very comfortable with your messaging on capital. I have a question on the buyback. You expect the authorization to be by September. And do you expect to complete the second tranche of the buyback all in 2021. And if by the third quarter results, your capital remained very solid, like it’s now, and you have a better visibility on what is going to be your full year profit and probably what’s going to happen in 2022 as well. Could you consider asking for an utilization for the interim for the 2022 buyback already, so that you will be able to start executing it from 2022 onwards? The second question is on 2023. If you can give us some color on what do you see the evolution of the asset quality into that year? Because when I look at the plan, even in the recession scenario, there is not a significant increase of the cost of risk throughout the period, thanks to the overlay on your action on credit quality. So I just wanted to know if you can give us some color on the asset quality for 2023? Thank you.

Okay. Thank you. I’m going to start and then Stefano is going to complement. So capital. So we expect to receive authorization for the last tranche of the 2021 distribution in September in the first half of September. And obviously, we’ve asked for – we called an AGM to ask for authorization from shareholders to increase the share count that we would be buying Subject to achieving those two things, we would be implementing in the following, I would say, if things go as we go today, 6 to 8 weeks. At the moment, it’s very premature to talk about any increase given that we’re also entering a much more difficult environment. Asset quality and outlook, I think there are a few things that maybe – and I apologize if it’s obvious. In terms of the recession and the impact it will have on banks, any bank, it’s already in inverted commas done. It depends on how you approach it. To give you an example, UniCredit has more or less an exposure at default of €450 billion. Every week, we grow less than €1 billion of EaD. As you can imagine, what will be the shock on the recession is the shock on what we have, not on what we’re going to originate. Because after a year, we’re just going to originate, if everything continues like today, about €55 billion, which obviously is a small fraction of the €450 million. So why are we confident? Number one, because our €450 billion of EaD have been deployed conservatively and thoughtfully, and that is our conviction. Secondly, because our €450 billion of EaD and related NPEs are covered conservatively and thoughtfully and we feel versus the average of the industry at a much higher level. And thirdly, because we have €1 billion of overlays. €1 billion of overlays is about 20 to 25 basis points of coverage, additional coverage. So when you look at 2023, to respond to your question, number one, we are relatively optimistic, if that’s the word, on the performance of our existing €450 billion. Because we stressed and we know what there is. We looked where the high risk exists, and we’ve tried to understand where we can get hit. And actually, for now, the outcome is relatively benign. Secondly, we are highly provisioned. As you’re seeing even this quarter, our additional provision or additional overlays are offset by write-backs of the past to a large extent, that because we are conservatively provisioned and did overlay in the past. Finally, when you look at the cost of risk, and let’s take 2023. And you – the – one way of looking at it is we said 30 to 35 basis points per year. That’s supposed 35. We have another 20 to 25 basis points just in overlays, which means what? But we can support a for the group, 55 to 60 basis points of cost of risk and not deviate an iota from our cost of risk embedded in the plan because we’re absorbing it with these overlays on top. So considering all these building blocks, we think that we are quite resilient going in. Obviously, it depends on how deepening the recession. At the moment, our recession scenario is a minus 2.3%. I remind everyone that we started from our perimeter at 4.7% positive. So it’s a big excursion, but it is obvious that it goes – if it goes much deeper things change, if it goes much less, things change. So for the time being, we think that the minus 2.3% is actually quite conservative, given the indication that we see at the moment. And I want to also add one other point on that. It is true that we see some pullback and deceleration on lending, and we have some metrics that have often indicated the start of recessions, absolutely true. What is not clear is whether that pullback is due to the actual start of a recession or to the fear that exists across our clients and the clients of everyone due to what we read on the newspaper every year, every day regarding the recession is coming, it’s going to be very deep and it’s going to be very hard. When you read that every day, obviously, you delay investments you increase savings, you take more conservative measures. So now we need to see what in fact is going to happen.

As well as integrating what, Andrea, I’ll add maybe a couple of points on the performing portfolio. So you can see some details also on Slide 31 of our presentation. So in relation to Andrea was commenting on the EaD, €450 billion, consider that small business is only 3% of our group EaD and is highly secure because it’s about 60%. And when we are looking to individuals, only 4% of EaD is represented by consumer financing. And on mortgages, our portfolio is low LTV. So on average, it’s 50%. So, together with the point that Andrea already highlighted of enterprises and on the overall dynamic of the expected loss, because our expected loss on the stock of the portfolio is currently at 35 basis points, so combined with what Andrea already mentioned in relation to the overlays, the level of provision on the coverage, this is making us confident in relation to the cost of risk next year that we are confirming between 30 and 35. We do expect an increased level of default rate. Current, we are at low levels, 0.8% this quarter, so it’s in line with Q1. We’re expecting an increased default rate in second half and also during the course of 2023, but this is already embedded in our guidance of cost of risk between 30 and 35.

Thank you.

The next question is from Benjie Creelan-Sandford with Jefferies. Please go ahead. Benjie Creelan-Sandford: Hi, good morning. Thanks for taking the questions. Two for me, please. The first one was just around the NII outlook. And I guess the news last week from the ECB was broadly positive certainly in light of your upgraded guidance this morning. But I guess one cautious tone on the ECB meeting last week was just around their potential review of the compensation of bank’s excess liquidity holdings going forward. So I just wondered if you have any comments on that, how you think that could impact the rate sensitivity or if it could change how you manage your excess liquidity or your TLTRO borrowings going forward. The second question was a broader one just on the strategic approach. I guess, look, if we look year-to-date, particularly on the retail banking side, uncertainty has gone up, yes, but most banks – most retail banks have either reiterated or upgraded their profit guidance, yet market valuations have gone down. Obviously, if we look at your capital performance this quarter, you’ve recovered a lot of the excess capital. So I’m just wondering how those things might change or impact on your thoughts around M&A versus buybacks going forward. Thank you.

So I will start from the first one. So as I was mentioning before, our managerial NII sensitivity, assuming deposit facility rate at 50 basis points next year is bringing €700 million more net interest income this year and around €1.5 billion next year. This is assuming no condition in TLTRO III. In our case TLTRO III volumes is around €107 million. We will postpone the payment of around €12 billion in first quarter ‘24. And the other part that is the main part will be reimbursed in 2023. So this, let’s say, plan is already embedded in the figures that I was highlighting before. With regard to your point on the tiering, we are not considering any contribution anymore from the tiering, neither positive or negative. So fundamentally, no contribution. So far, the contribution was around – a little bit more than €100 million per year because the amount of deposit that were subject to tiering is around €25 billion. So as a matter of fact, no consideration at all. You can do your math in order to calculate potential change of the tiering in case in future.

So let me take the strategy. I think let’s look at it in two ways. First of all, the most important, the organic as we are. We’re obviously quite thoughtful on everything we do going forward. Actually, we’ve been for a few months given the environment. So while we are, at this point, confident that it’s a deep slowdown, not a recession, we have to manage with an eye on potentially being wrong and that it is a deep recession. So we are thoughtful. We’re very targeted. We are trying to anticipate where it’s going to hurt less and then try to help the client where it’s going to hurt more potentially preemptively. So that does not change. But whatever we do is not constrained by capital. It’s not constrained by having to catch up on provision. It’s not constrained by starting asset quality that may not be what you would wish at the moment. We do believe that not everyone is in this position. So if we are right, there will be some, let’s say, pullback in the market in certain places. And if that pullback occurs, we will continue to go ahead, not accelerating, but taking advantage of the pullback according to our metrics. So we see it as an opportunity to improve our position thoughtfully and alongside our metrics. This is the organic and probably the most important. With respect to M&A and buyback, I think on both, I would say the following. Let me start with buyback. We were very clear that at the core, the starting €0.16 billion were predicated on distributing the excess capital we would generate every year, not distributing the excess capital. So if we start a year like we started this year at 14, 13 and we finished the year at whatever, it should be predicated are not dipping lower than 14, 13 because otherwise, we would be using our excess capital to pay. That’s point number one. So you can do your math every year depending what we expect to finish with. The excess is our possibility of distribution, possibility. We need to generate it first. Secondly, there is obviously a thoughtful view on what lies ahead, which we will have, and potentially at the end of this year, we’re going to be much clear on where we are. But at this point in time, given the overlays, the provision, the position we’re in, our capital and everything else, we feel that we’re going to be able to maintain what we have promised also for 2022, but we need to earn it between now and the end of the year, get your approval and get the ECB approval. That does not change. As we said when we started UniCredit Unlocked, we then have the excess capital to 12.5 to 13. And we said very clearly that, that excess capital could or should be used in three ways. One, absorb unintended shock, and we demonstrated in Q1 and in Q2 that, that’s what we did. We got an unexpected shock. We use that excess to absorb it without deviating. In fact, we continue to accrue our dividends even at a faster rate. Secondly, two, grasp possibilities of M&A at advantageous terms. We continue to look at M&A. I’m not going to repeat our parameters because I think all of you are probably tired of hearing it. They are the same. If during this crisis, opportunities occur at the right terms and usually in this location, environment, opportunities have a tendency to occur more than in bull markets, we will take them. And if we don’t, we will not. Thirdly, if it doesn’t go in one and two, use that excess capital to return it or to complement the distribution that we have at our disposal, but it’s only the third. And the reason it’s only the third is because shocks aside, which is obviously very important, we need to continue investing in the business, developing this business and putting UniCredit increasingly on the front foot whatever we do. So if we need to use capital to do that, we will without affecting negatively what we have committed to. I hope that, that answers your question. Benjie Creelan-Sandford: That’s very clear. Thank you very much.

The next question is from Giovanni Razzoli with Deutsche Bank. Please go ahead.

Good morning to everybody. I have clarification on the NII. Thank you for the indication that you provided out. The €9.2 billion for 2022 is definitely stronger than expected. And based on my calculation, it is implying an underlying growth – low single-digit growth, if I look at the quarter run rate, which is implied in that guidance. As we are entering after 10 years of collapsing the rates a new scenario where we are not that familiar with, at least in the recent past, would you be so kind to share with us what could be the moving parts on NII in this run-rate for the quarter and the guidance also for 2023? Because in my view, it’s important to clarify what also is, over the long-term, the structural changes in the revenue of the banks, vis-à-vis a possible cyclical impact on the cost of risk, which hopefully should, as I said, should be more cyclical than structural. And the second clarification on the CET1 is it like that the 15.7% does not yet include €1 billion share buyback that you plan to execute in the second half? Thank you.

Yes. So Giovanni, on the net interest income, so the €9.2 billion guidance is excluding Russia, so it’s the group, excluding Russia. As we’ve commented before, the main drivers are fundamentally raised driven. This quarter, the average Euribor was up 17 basis points. But as a matter of fact, with the assumption that we have utilized, as a matter of fact, the Euribor will move up and will move positive. So with the net interest income sensitivity that we have, that will drive the vast majority of the change to the net interest income both in ‘22 and in ‘23. With regards the volume contribution, the volume contribution has been positive in the quarter. On average, with around €3 billion more loans this quarter end to end was €6 billion more, we are expecting to keep on growing lending but at a lower pace. If you look the pricing component of the lending so far, especially in Western Europe, still the front book pricing rate is lower than the back book. This is tightening up when we are looking at the spread. But as a matter of fact, still, we are seeing this type of compression. Also consider in the overall dynamic of the net interest income deposit dynamic of CE. So you should look not only to Western Europe but CE. Because if you look country like Czech Republic or Hungary and Romania as well, as a matter of fact, the level of rates that we have contributed and will positively contribute as well. For the net interest income next year, main driver will be rates. Volume-wise, that will be depending on the overall evolution of the scenario. We have commented about a couple of scenarios, also laid down a recession. It’s clear that the lending dynamic will be impacted as well. In relation to the capital, you are right. So the 15.73 is not including the €1 billion buyback. It will be deducted once we are receiving the approval. The impact will be around 30 basis point of common equity on capital.

Thank you.

The next question is from Andrea Filtri with Mediobanca. Please go ahead.

Thank you. Two questions. One on cost of risk and one on net interest income, could you please help us to understand what sort of protection on the cost of risk you’re factoring in your guidance from the remaining government guaranteed loans that you have generated during the pandemic? And the deposit beta, what deposit beta do you discount in your NII guidance for retail and corporate across the different geographies? And if you can give us your sensitivity also with 0% deposit beta across all categories? Thank you.

Okay. So in relation to the protection, as I was commenting before, so the stock is €24 billion. So it’s around 30% of the total enterprise book, that’s – it’s first-demand guarantee. So as a matter of fact, can execute when there is a default from the standpoint. So we should have a trigger. So it should not be a normal classification but should have an effective default. So from that perspective, we believe that the protection is absolutely effective, and such a protection is taking consideration in our credit parameter, including on top of risk-weighted asset, but also in relation to the dynamic and guidance of the cost of risk. With regards the beta, as a matter of fact, the beta on the deposit is currently slightly below 30%. As a matter of fact, that percentage is, on average, lower. So it’s close to 20 on the retail, and it’s depending on the different type of corporate that we have in the different regions, so can arrive also to 40, 45, depending the topology of corporates that we have, especially in the Western countries. The sensitivity is changing differently, depending also on the type of contract. For example, on the corporate side in Germany where we have an excess fee, we are considering 100% repricing until zero, and then we go back to the normal sensitivity. I was already commenting before when I was mentioning that we are expecting between 0.5 and 100 a change in the NII sensitivity. That change in the NII sensitivity progressively down for every 10 basis point to 100 to 80 is already take a consideration a change in the bit on the deposit because the main driver of the net interest income sensitivity at about 0.5 will be fundamentally change in the beta.

Thank you.

The next question is from Domenico Santoro with HSBC. Please go ahead.

Hi, good morning to everybody. Thanks for the presentation. Just a couple of questions on capital. First of all, there is 38 basis points from Russia, which I understand are not tax-related. Can you explain the region? And whether there is a risk of any reverse going forward? And then back to your presentation, Page 26, where you show the capital waterfall. Can you clarify the 90 bps regulatory headwind from others that you expect in the second part of the year? How much is the regulatory headwinds? You probably mentioned 50 basis points already. How much and what is the remaining? And whether this includes also some risk of the asset optimization on top of the €10 billion that you are already realized in the first half. Thank you.

Yes. So on – I will start from the second. So in relation to the projection for the second half, as a matter of fact, we are including around 50 basis point of regulatory headwinds. This is mainly EBA guidance. So it’s the last tranche of the EBA guidance in our case. The calendar provisioning impact taking consideration our level of coverage is really low. So we are dealing with a few basis point of capital. The remaining portion is fundamentally connected with conservative assumption on the dynamic of the ruble and also on the dynamic of some fair value through OCI items. For example, DBOs and fair value to OCI connected with [indiscernible]. So these are the main items that we are including. In relation to regulatory headwinds, in the plan, we were assuming, on average, 15 basis point per annum, so ‘22-‘24. As we commented already, the vast majority of these effects were expected, and we are expecting to have in the second half this year, i.e., from next year onwards, we are not expecting relevant regulatory headwinds anymore. With regards to Russia and the impact connected to Russia to the capital, as explained by Andrea, the impact are twofold. So we had a positive impact of 10 basis point connected with the cross-border exposure, connected with risk-weighted asset reduction and LFP releases, overall 10 basis points. This is a permanent one because it’s connected fundamentally with reduction and so with reimbursement. In relation to the local participation, 52 basis point on that 18 basis point is connected to the ruble dynamic. And so in a way can, let’s say, turn positive or negative, depending from the ruble dynamic. And so in a way can, let’s say, turn positive or negative, depending from the ruble dynamic. On the risk-weighted asset that is 32 basis point. During this quarter, we might have some volatility on that. However, taking consideration that both me and Andrea commented, the focus is keep on de-risking and optimizing. So, we might have a certain volatility, but in an overall reduction trend.

Thank you.

The next question is from Delphine Lee with JPMorgan. Please go ahead.

Yes. Good morning. Thank you for taking my questions. My first question would be on Russia. Just wondering now that the impact from, let’s say, next year to a write-off scenario would be 50 basis points negative, and I think before, it was quite limited. Just thinking does that change really your view about how you approach this exposure? Are you still looking to try to exit, or has that changed? The second question is just a very quick one on capital, on the RWAs. I was just wondering if you – I mean if you could explain a little bit the €5 billion decline in RWAs related to hospitality, which seems a bit surprising given you have changed your macro assumptions and they are a little bit worse. And also, if you could also give us a little bit color about what positive regulatory headwinds you had this quarter, which I think was 38 basis points or so. Thank you very much.

Okay. I will take Russia. So, as we said, we have – we can look at Russia in two ways. The first one is the cross-border exposure, which we continue to grind down either through normal repayment through the life of these exposures or bilateral negotiations or accelerate repayment of reduction when certain letter of credit, the backup trade that is not going to happen, are canceled. And I think that’s the line of travel. It doesn’t change. The decision we take are purely economical, i.e. depending on the pricing we can get as we increasingly sell rather than anything else, need to make sense with us. And that is an important point. We do not have pressure to sell at any price. With respect to the local position or the local presence, so the local presence is being managed actually quite well by the local team. And I remind everybody that in addition to our team there, we have – the real franchise is 1,500 corporate clients who are very close to us, and of which 1,250 are Europeans, primarily Italian, German, Austrian and obviously CE because these are our areas of presence. Those clients who are there and they are dealing with the situation like we are dealing with the situation. And our day-to-day management consists in continuing to support them as they face the same challenges that we are facing them, all of that within the backdrop of trying to optimize and to manage the situation the best that we can. So, that’s what we do in “organically.” Inorganically, we continue to look at alternatives. I think that – well, I know that, in addition to local interest we now have increasingly interest from third-party countries that have not sanctioned the country. And therefore, we have interest in potentially taking the place that the West is leaving. We are having discussions on that basis. And again, like for cross-border, we have no pressure given our position, but we are looking at options, and we will continue to do so in an orderly fashion.

In relation to PD pro-cyclicality, yes, we have around €5 billion risk-weighted asset benefit in the quarter. That is arriving fundamentally from the inclusion of the better financial statement of the company in our model. So, taking in consideration that there is a delay, we are referring to the financial statement, ‘21, that is mainly the reason of the fact. With regards to the future, in the second part of the year, we are expecting to have a neutral or slightly negative PD pro-cyclicality, however, not meaningful from the projection of risk-weighted asset and capital standpoint. In ‘23 and ‘24, we might have a negative PD pro-cyclicality taking into consideration the overall dynamic of the economy. Having said that, in this slowdown, the impact in terms of risk-weighted asset and the basis point of capital will not be meaningful. The recession scenario can be more important, but can be compensated by the lower lending dynamic growth in such a scenario.

Thank you very much.

The next question is from Britta Schmidt with Autonomous Research. Please go ahead.

Yes. Hi there. Thanks for taking my questions. The first one would be on your Russian scenarios. I noticed, I think in the footnote that the recoverability on the cross-border, the assumption has changed from 40% to 50%. Maybe you can give us a little bit of color as to whether that is due to the position of the portfolio that you are de-risking or whether you had a change in view on your overall losses. And my second question was – it’s hard to call the political outlook in Italy at the moment, but do you think that there is a chance that some hostile measures could be directed towards buying banks by new government? And maybe that question not only for Italy, but also where do you think that bank taxes like the one launched in Spain risk in any of your other regions that haven’t imposed in yet? Thank you.

Maybe I will take Italy. So, as I probably said earlier this morning, clearly, the change in government comes at an unfortunate time given the environment in which we are. And obviously, moving on from Mario Draghi, given his credibility both internally and externally, is obviously a negative. But I would say the following. Point number one, debt aside, the fundamental – I encourage you to look at the fundamentals of Italy in terms of trade, balance of payment, resilience of the corporate and the individual sector. Italy of today is not the Italy of 5 years ago or 10 years ago. That’s point number one. Point number two, elections are obviously coming quite soon. We don’t – we are not yet clear who is going to be in charge of a new budget law, i.e., the new elected government or Mario Draghi still. Regardless of that, I would have thought it’s quite complicated to substantially or significantly or materially deviate from the line that has been assumed in the past just because given the recession of a difficult environment in general. Given the conditions that are the presence necessary to obtain our [indiscernible], given a whole bunch of other things, and it is, in my opinion, unlikely that we have a material change of direction at least in the short-term. Finally, with respect to potential laws or approaches negative to banks, we don’t have any information of anything like that. And again, I would have thought we would have heard if anything like that was planned.

In relation to the cross-border portfolio, you are right. So, as mentioned by Andrea, the coverage is 30%. The quality of the reserva portfolio is higher because, as a matter of fact, in the first half, we have been able either to sell or to have repayments or position. In relative terms, we are having still sound, but lower quality. This portfolio is performing, so with the payments accordingly to the standard shadow is Stage 2, but still performing. So, taking into consideration the high quality of the portfolio, the payments, but clearly also taking into consideration secondary pricing that we are clearly more than monitoring because as you know, we are in contract for potential de-risking actions, we decided that for this portfolio, the appropriate pricing conservative and extreme loss is 50%.

And maybe let me add one thing maybe. We always benchmark the only thing that is visible, bonds. Bonds trade where they trade on Russian names, because they don’t trade. And they can be traded by hostile nations and because we are now receiving payment of interest and capital because we are not, we have decided not to receive it. Loans are not like that. First of all, they are not supposed to trade. Secondly, payments have arrived regularly. I would highlight, as Stefano has said that even the lower quality within, I would have – I would say, the higher quality portfolio we had, once sanctions have started and the appreciation of the ruble has started and a number of other things have prepaid the entire capital 4 years, 5 years in advance, just unilateral, not because we asked. So, when you look at that on our loan portfolio, number one, as Stefano has said, quite surprisingly, the parts that were probably smaller companies and therefore a little bit less more risky in our mind, and we are provisioning inside the 30% at a higher rate have all prepaid. And the ones that are more not sanctioned and define the, let’s call it, the Russian benchmark for credit names are now the very large majority of our portfolio and are paying regularly. So, that’s why I would look at it in this way is, this is one of the situation, Britta, I think diversification is not necessarily an asset. Concentration on certain names is probably a better asset. And now we have those certain names with the same coverage of a broader portfolio.

Great. Thank you.

The next question is from Hugo Cruz with KBW. Please go ahead.

Hi. Thank you. So, I wanted to ask you about the IFRS 9 macro scenarios. You updated them. Can you tell us what probability you assign to the slowdown versus the recession scenarios? How did you come up with those probabilities? And what are you seeing broadly on the gas shutdown from Russia? And second question on DTAs. You beat on profits. You increased your outlook. So, can we expect a positive P&L impact from DTAs in the second half this year? And if so, could you give guidance? Thank you.

Maybe I will take quickly the scenario, and I will leave a more exciting DTA topic to Stefano. On the scenario, we are assuming on the updated slowdown 60% chance, and on the recession, 40% chance – our recession scenario in our perimeter. And so that’s we will update both the macro – both scenarios as we go and also the probability. So, that’s a little bit of that. I also think it’s important – we always talk about gas shutdown. First of all, the shock – the real shock if you look at our companies is no longer viewed as gas shutdown. It’s viewed as value chain disruption. We have had plenty of time, not we, our clients and governments to diversify gas sources and energy sources. So, with the past enough time, the ability to withstand shock has improved very materially. So, that’s point number one. What obviously is occurring is a value chain disruption, both in terms of ESG and a number of other things going into recession, but also in terms of where do you get those commodities from and at which price, which is the greater challenge at this point in time. And I think every company is on top of that at the moment and is trying to manage it and redeploy as countries are trying to manage it and redeploy. Personally, I see more, if not the same as gas, food and commodities, lithium, nickel, all of these things that are critical to our industry are getting dislocated and are getting repositioned in terms of sourcing. So, these are the things that, in my opinion, are going to hit us harder and over a longer period of time. But at the same time, the short-term hit with the past enough time is decreasing and is likely – and I don’t want to speak for something I don’t control, but it’s – I consider likely that it’s going to be, in part, absorbed by government measures in every country if it were to hit in that direction. And obviously, in our scenarios, we do not have any government support, but we think it’s likely.

Integrating on this scenario, so the scenario that we are using for IFRS 9 are just the same that you can see at Page 4, so slowdown and recession. The figures that you can see there are the same scenario that we are using for the application of IFRS 9. In relation to the DTA write-up, yes, you are right. Currently, we have more than €2 billion of balance sheet tax loss carry-forward DTA related to Italian perimeter. The guidance in relation to both the net profit, i.e., around €4 billion and the tax rate, so below 30%, is not including any DTA write-up in Italy. I have to say that, that will be depending on the final scenario that we will have. But having said that, I think it’s likely, and in case of a write-up, clearly also the tax rate will be below 25%. So, we will move, let’s say, closer to 20% rather than closer to 30%.

Thank you.

The next question is from Pamela Zuluaga with Credit Suisse. Please go ahead.

Good morning. Thank you for taking my questions. You have been delivering an encouraging progress of UniCredit Unlocked, but I was thinking that the planned focuses on shifting the bank’s business model towards a more fee-driven growth. However, most of the improved guidance, I think comes from NII upside from the rising rates and, well, of course, on lower cost of risk. So, how are you thinking about your progress on the initial transformational story idea on the fee income generation? And then the second one is a follow-up on the TLTRO. How are you thinking about the bank’s liquidity position as you repay TLTRO funds? Should we think of that catalyst maybe triggering a more costly search for deposit growth? Thank you.

Okay, Pamela. So, first of all, fee-driven UniCredit Unlocked and NII, okay. So UniCredit Unlocked was number one. In terms of direction of travel, we just said we are going to deploy capital with discipline where the risk-adjusted returns exceed our cost of equity, as simple as that. So, we are not going to be driven by volume. We are going to be driven by quality credit or quality capital deployment where the returns adjusted for risk exceed the cost of equity. At the same time, we said that with respect to fee, obviously, it is – you don’t even have to talk about capital deployment because they occur without capital. And therefore, they improve the overall profitability of the capital you have. In the macro environment that we assume for UniCredit Unlocked, that meant a substantial shift of our P&L and balance sheet towards fees. It’s already quite high, but it would continue to grow because we have a dynamic on NII and the dynamic on everything else. The opportunities to deploy above the cost of equity were more limited. As we move to a different environment with higher rates and notwithstanding the potential increase in cost of risk, you have two situations. One, headwinds that is preventing us to grow as fast as we want certain areas of fees, okay. The game has just become relative, and that’s what counts. And on the other hand an ability to deploy our balance sheet or our capital where we deploy it in more situation, still at the same criteria. So, yes, we are moving from a period where the only thing we were talking about is how to bring fees to 100. And now we are remembering 10 years in, but actually – or more than 10 years that actually, there is one thing that banks do, which is lending and deploy capital that can be profitable when there is a positive spread. And so we are starting to look at the shift in our P&L towards that. So, I think it doesn’t change the criteria of UniCredit Unlocked. But as we adjust the macro below it, the numbers work in a different way with potentially more momentum on the NII-driven and on the capital deployment-driven, less momentum in our fee. That does not mean at all we are reducing the emphasis or we are not driving as hard as we can on fees, it’s just that the market will absorb less. And therefore, what counts now is performing in that area as well as we can and hopefully better than peers.

TLTRO III, if I would distinguish UniCredit and the system. So, for UniCredit, it’s not liquidity. It’s neither a liquidity, nor refunding topic. So, in consideration of the amount of liquidity deposits that we have in ECB and the amount of liquid asset, as a matter of fact, TLTRO III is not an issue, and the reimbursement plan was already included in our funding plan. For the system, I think that you need to look also to the loan deposit to the single bank. So, if in our case, the loan-to-deposits is below 100, and on top of that, we have a high amount of liquid asset and deposit to ECB. That’s why it’s not a point. You might have in the system some, let’s say, player with a different loan-to-deposit ratio that can be impacted. And as a consequence with this situation in terms of funding costs, they might adjust, let’s say, the pricing of the deposit. So, it should not be excluded, but I am not expecting an important system relevant impact in the short-term.

The next question is from Chris Hallam with Goldman Sachs. Please go ahead.

Good morning everybody. So, two simple questions for me. First, in your recession scenario, when you look at the structure and the quality of the €450 billion ARD [ph], are you more concerned about higher credit costs in your corporate exposure or in the consumer exposure? And is that picture different between Germany and Italy? And then second, how are you seeing corporates trying to adjust to the tail risks you mentioned on gas and other commodities? And perhaps specifically, you referenced the lending survey data, which pointed to slowdowns in fixed asset investments, but how do you think that demand picture would evolve for longer term financing versus shorter term liquidity needs?

Okay. So, in relation to the impact of the recession, we were briefly commented before. So, consumer financing percentage of ARD, if you look, the group is really low. It’s 4%. And if you look in relation to ARD of Italy, 6%. If you look, for example, to Germany, it’s 1%. So, it’s fundamentally not a relevant point. The analysis and detailed analysis that Andrea was highlighting before has been done for the group, and clearly, with a specific focus on the most relevant sectors, so machinery, metals, automotive, chemicals, especially in Italy and Germany. I mean we have done it in all the groups. So, the percentage that Andrea was referring to, i.e., below 1% of the total group and it is below 5% of these focused enterprise in these sectors, I mean it’s not really different if you look Italy and Germany. Germany is slightly higher. But as a matter of fact, it’s not really changing and – the needle from this standpoint.

The next question is from Manuela Meroni with Intesa Sanpaolo. Please go ahead.

Good morning. I have two questions. The first one is on risk-weighted assets. They declined by €10 billion in one quarter, excluding Russia, of which six active portfolio management and seven from the regulatory headwinds. You already mentioned something regarding the PD pro-cyclicality. I am wondering if you can provide us with further details about the actions that you put in place to reduce so much the risk-weighted assets in this quarter and if we can expect some similar evolution also in the next few quarters. The second question is on cost. Actually, you confirmed your guidance on cost, but it seems to me that you are performing very well on the cost side. So, I am wondering if we may expect some improvement in the cost guidance in the next few quarters or if you are expecting some negative impact from inflation or higher investments in the second part of the year. Thank you.

Maybe I will start a little bit on the cost, and then I will pass it to Stefano, and also on general RWAs. So, point number one, I think we were quite clear when we started with a strategy that any financial service organization usually has very significant scope to optimize capital allocation and capital deployment and capital pricing. Many say it was done before. In my experience coming probably from the other side of the fence where we got crushed, it’s never enough. What we have found out and as an organization is that the numbers that we had put out there as ambitions – ambitious, but achievable, we are able to exceed. And the more we get good at this, the more we exceed. So, I think the direction of travel, just the message is we were going to have significant contribution from the sale of certain subsidiaries to our RWAs optimization. And now we are going to exceed our numbers without that sale. And that sale is now contributing more net income to what we have. And I do believe that, that type of improvement or general improvement, not magnitude, but in terms of psychology is at all levels of the group, and it will continue to contribute. As one example, we, on purpose, assigned [indiscernible] to our Italian finance division, because he was and is responsible for optimization of RWA throughout the group. He has done a very good job in driving that. And given that Italy is the lion’s share of that improvement. He is going to double hat Italy and the rest of the group to drive that in as – a general way in as harder a way as possible. Costs are not that different. I think efficiency for banks is paramount. Like it or not, clients want the same service for less and all the time. And like it or not, we are challenged by fintechs who have cost income ratio much, much lower than ours. So, we need to continue finding efficiencies. And we are finding efficiencies very simply by simplifying, optimizing our processes, reviewing the way we do things and stop doing things that actually when you go granular, we shouldn’t have done for a long time. That continues to drive improvement and is allowing every region and every area to beat in spite of inflation. Now, in terms of updating what we are going to do on – for the whole year on cost, I think it’s very premature because we still don’t know what the real environment will be in the second half. We still don’t know the extent of inflation. We still don’t know a number of things. What we do know is that we have teams very focused in flight at all level of the organization to try and bring home those results as well as can possibly done.

Integrating on costs, we are not expecting an increased level of IT investment in the second half. In relation to risk-weighted asset in the quarter, if you look, the €6 billion active portfolio management action we have executed, if securitization and NTA sales were a little bit more than €3 billion benefit on risk-weighted asset, the remaining portion, let’s say, around a couple of billion is related to EBA-negative clients deleverage fundamental. These two type of action will remain in place with the same focus also in the second half. So, all-in-all, the focus will remain the same. I think that the dynamic of the risk-weighted asset will be also depending on the overall evolution of the lending in the second half, so depending also the peer of the clients following a reduction in the growth of the GDP in the scenario that we have commented before.

Thank you.

The next question is from Andrea Lisi with Equita. Please go ahead.

Hey. Good morning. A couple of questions. The first one is on the loan loss provision breakdown in the quarter. So, there is a €600 million related to back to performing. Just to understand a bit the process leading to the release of this amount and if you can provide us an indication of the amount of this item for the first quarter of 2022 and also for the last year. And the second question is on the target of €4 billion net profit, if it already includes the impact of the new agreement with CNP? Thank you.

So, in relation to CNP, the answer is no. So, it’s not including any positive neither from a P&L standpoint, nor from a capital standpoint. So, the effect will be accounted for in the future, not in second Q. In relation to the positive write-backs that we have, these are due fundamentally to back to performing position, so performing that moved from likely to pay to performing, but also in many times throughout payments. As a matter of fact, we had not a similar amount, but a lower amount in Q1 as well. And we might expect also this type of write-backs also in the second part of the year. The magnitude can be different, but as a matter of fact, taking in consideration the type of approach that we had in the past in relation to allocation who are likely to pay and the quality of the portfolio. This type of situation can be there also in the second part of the year.

The last question is from Christian Carrese with Intermonte. Please go ahead.

Thank you for taking my question. The first question is on Russia and also one on the asset quality cost of risk. On Russia, you elaborated on the potential option. Could you give some indication on what we read on the newspaper on the option of asset? And in terms of capital, we saw the capital weak in extreme loss scenario that went up from 35 basis points to 80 basis points. Do you confirm that the difference is mainly due to participation and the impact – the potential impact would go through balance sheet rather than P&L? And capital, excluding Russia, if I have done – if we are not mistaken, the pro forma common equity Tier 1 taking into account 30 basis points buyback, plus 90 basis points headwind and then, let’s say, 50 basis points capital ratio would mean that you could end up for 2022 with a common equity Tier 1 impact to around 15%, so around 90 basis points higher than last year? This, what could mean? I mean you would prefer to do additional buyback or maybe looking at M&A with higher flexibility in terms of being it’s hard, not projecting but cash plus €7 million with better value creation for shareholders? The second question is on asset quality, cost of risk. You said, in 2023, you are assuming your recession scenario, cost of risk would be around 50 basis points, 55 basis points, including the €1 billion overlays. Could you split between Italy and Germany? What we would expect in terms of cost of risk? Thank you.

So, let me take the last question because I created the misunderstanding. So, we didn’t say that the cost of risk would be 50 basis points, 55 basis points. We said that if due to the macro environment, cost of risk were to be at actually 55 basis points to 60 basis points, 25 basis points of that – 20 basis points, 25 basis points of that would be the overlays. And therefore, for our numbers, you are still at 30 basis points, 35 basis points. That’s what we said. I am not saying that next year we are going to be at that level. And by the way, that was group-wide. It is true that most of our overlays are focused – not all, but most are focused on Italy. So, it just if the scenario of recession hits and hits hard, the first 20 basis points, 25 basis points, let’s say, hit above our 30 basis points to 35 basis points guidance can be absorbed without any further impact by our overlays. That’s all I said. Just sorry, but I wasn’t clear.

So, I would start from Russia. We have a special team working on all the de-risking action that can be done like in the past via asset swap or [indiscernible] sale and so and so. This is ongoing. And as a lighter, more than once, we are working on that. We will work on that defensible pricing. In relation to the participation that have been moved from IFRS 5 back in news, you are right, there was a positive effect. The positive effect was not in profit and loss, was impacting the equity and was impacting the equity for an amount of around €500 million. Converted into capital, it is around 17 basis point positive effect on the capital during the quarter. With regards to the recession scenario and the impact on the cost of risk for Italy and Germany, one point that Andrea commented before, overlays – a real important portion of the overlays related to Italy. And so in the recession scenario in both ‘22 and ‘23, it’s important to take into consideration that these overlays will be utilized. And as a consequence, also the cost of risk of Italy will be, let’s say, positively impacted by this utilization. In terms of dynamic of Germany, the impact on Germany, we will have a low-double digit basis point of cost of risk, but is low-double digit basis point of cost of risk considering the high-quality portfolio of Germany.

Mr. Orcel, this concludes the Q&A session. The floor is back to you for any closing comments.

Thank you very much, everyone, for your questions. Stefano and I remain at your disposal in the next – well, later today and the next few days to answer anything else. And with that, I think we conclude the call and thank you again.

Thank you.