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’s fourth 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. Good morning and thank you for joining us. Before I start, I would like to thank all our colleagues that have gotten us to this often going through grinding obstacles and seeing it through. It’s very much appreciated. 2022 was a challenging year for people across the world, not least the clients and the communities we serve. Against the background of unprecedented turmoil across Europe, UniCredit has sustained its own internal transformation and further strengthened its lines of defense to ensure that we are ready to fit the future and win. We are not the same bank we were at the start of 2022, much less at the start of 2021. We have worked hard to evolve and today’s results are testament to those efforts. Before I take you through our results, I would note that what we have guided this year, mostly referring to the group, excluding Russia, given the uncertainty related to our exposure. Going forward, I will refer to group numbers, including Russia. We continue to de-risk, but given the magnitude of our remaining exposure, the actions are part of our business operation, not an extraordinary measure. The numbers, including Russia are those that both determine our overall performance for the year and support our distributions. Let’s turn to Slide 2. Before I take you through the detail, I wanted to give you a snapshot of the year. Thanks to relentless execution, we have delivered a record fourth quarter, the eighth consecutive quarter of year-on-year growth and the best full year results on a like-for-like basis over a decade. These results are driven by our industrial transformation, which has led to record operational and capital efficiency and set the base for sustainable future performance. We have delivered top-tier profitability on a new run-rate surpassing all UniCredit Unlocked 2022 and most 2024 targets, enabling best-in-class distribution whilst further improving our capital ratio. The strength of our results should also be considered in light of the proactive actions we took to prepare for the future, including enhancing our already robust lines of defense and actively managing our Russia exposure to further protect or indeed propel 2023 and 2024 depending on the macroeconomic environment. We used our exceptionally good fourth quarter to execute additional prudential measures. Our results and their quality allow us to propose a total 2022 shareholder distribution of €5.25 billion, up 40% year-on-year, pending shareholder and supervisory approvals. With this, we will have distributed close to 60% of what we expected to distribute within UniCredit Unlocked whilst improving our CET1 ratio further, all underpinned by organic capital generation. The 2022 proposed distribution is composed of €1.9 billion in dividends and €3.35 billion in share buybacks, which we intend to commence as soon as possible post-AGM, approval on March 31 with supervisory approval expected beforehand. We aim to execute our share buyback in two tranches given its size, €2.4 billion post-approval and the remainder expected in H2 shortly after the completion of the first tranche. We are confident of supervisory approval based on discussions with the ECB, the strengthening of our leading CET1 ratio, extremely strong organic capital generation, which more than comfortably fund our distribution and step up in profitability and our robust lines of defense. Given the above and the expected macroeconomic environment, we are aiming for 2023 results and distribution to be broadly in line with 2022. Let’s turn to Slide 3. You can view the evolution of our bank on the UniCredit Unlocked in two stages. Our work to structurally improve the bank began with a focus on those easy-to-execute business imperatives, laying strong foundation for us to build on as we start to address the more substantive fundamentals, accelerating on that industrial transformation supported by the proactive and prudent measures taken to-date. Let’s turn to Slide 4. UniCredit’s transformation is evident across our entire group. We are clear on our direction, united behind a clear set of values, a structural better bank with an alpha-driven improvement in returns. We have stepped up our profitability, sustainable run-rate across all our four – three levers. All regions are outperforming with client solution proving to be a key engine for quality, sustainable growth. Our ESG volumes are above targets and Russia has been resized and repositioned at a minimal cost. This all supports the significant growth in our best-in-class distribution whilst further strengthening our leading CET1, which is up by 78 basis points since the start of the year pro forma for the distribution. Let’s turn to Slide 5. Our ambition is to be the bank for Europe’s future to set a new benchmark for banking, one that delivers value for all the stakeholders in a balanced fashion, shareholders, colleagues, clients and communities. Balancing their interest is how we will realize our vision for the long-term and deliver on our purpose of empowering communities to progress. Let’s turn to the next slide. We turn our organization on its head, centering it around clients and their need. We are delivering excellence across four industrial pillars, which allow us to optimize across three financial levers. Our industrial transformation is designed for our clients and addresses both our commercial and operating machine. The first pillar, our people and our organization. Our people are being empowered within clear frameworks and objectives. Decision-making has been returned to the right place with a great release of energy. Second, separating content and products from coverage, allowing us to focus and excel. We have two best-in-class product factories, which leverage the scale of our 13 banks to attract best-in-class talent and partners such as Allianz and Azimut to deliver equally for all our clients. These capital-light factories are the engine of our commercial transformation. They connect our bank together, drive high-quality revenue and are difficult to replicate by smaller players. Our client franchise has been reunified crystallizing significant synergies, allowing our local coverage to be differentiated and to punch above its weight. Our commercial machine has strong momentum to accelerate further as we continue to strengthen our factories and improve the cooperation with coverage. Our management focus has now shifted to ensure that the operational machine further accelerates its transformation. We have spent time on our technology starting to bring back key competencies in-house, reducing fragmentation, hiring 500 new technology talents, largely engineers and upskilling hundreds of our colleagues. What’s challenging, this work has been critical to reinforcing our security and resilience with incident down 35% as well as enabling us to build out our digital and data offering. We now have 42% of our data directly accessible through a global data platform, doubling the levels of 2 years ago, well ahead of our targets. Streamlining processes is central to our plan as it improves speed, efficiency, client, and employee experience. Once our progresses have been simplified, they can be automated and digitalized. Finally, our culture has come together faster than I had anticipated. Our people are reenergized, confident and determined to win. You can see that in these results. Let’s turn to Slide 8. ESG is a prerequisite for how we do business. Our key ethos is to lead by example, embedding our values in all that we do. Today, we announced our net zero 2030 targets on the first three priority sectors. We aim to be net zero on our finance emission by 2050. Our ESG business volume stood at €58 billion in 2022, ahead of our annualized run-rate. Within this, social lending amounted to €4.8 billion, a step-up level relative to the past, much is still to be done. Social remains a key focus for us reflected in our €2.5 million of new initiatives of education funded through the foundation. From supporting education via our banking academy in Italy to the UniCredit foundation strategy to tackle school dropouts, we are already seeing tangible impacts for our group’s effort. Our diversity is strong. And in terms of gender, we are the first EU bank to obtain EDGE certification in Germany, Austria and Italy. This year alone, we have invested a further €30 million to meet our commitment to ensure pay for equal work by 2024. Let’s turn to Slide 9. Our well-defined industrial strategy, our people working together with strong principles and values and the combination of our three levers of cost, revenue and capital have delivered quality growth and operational and capital excellence. After years of retrenchment, we have recovered our ability to grow and are doing so significantly and in a qualitative way. Our new targeted approach to cost reduction focuses on non-business-related activity. It is clearly visible in our positive jaws with operating leverage up 16% year-on-year. Similarly, our focus on capital efficiency and return is delivering as we continue to grow revenues whilst compressing RWAs. Let’s turn to Slide 10. As a result, we have substantially increased both our return on tangible equity and organic capital generation outperforming peers while strengthening our lines of defense versus peers. Let’s turn to Slide 11. Our fourth quarter results have been outstanding. 2022 was our best year ever on a like-for-like footprint with all levers contributing to a meaningful shift in profitability. The numbers I will refer to on a year-over-year basis and continue to be on a group basis, hence, include Russia. Gross revenue for the quarter are up 29% and net revenue up 44% on very strong NII underpinned by excellent management of the pass-through. Despite some headwinds related to the TLTRO hedge with almost flat cost. Fees were only slightly down 1%, confirming resiliency of our fee base. Trading income remains strong and our cost of risk was down 27 basis points despite our continued prudence in building forward-looking provision and overlays. Our return on equity was around 12%, 14% normalized for our excess capital at 13% CET1. These results are even more impressive when taking into account the numbers of items we weighted on Q4. Cost absorbed a significant inflation relief payment, €80 million and a bonus adjustment due to our strong performance. Gross and net revenue for the full year are up 14% and 13% respectively, with costs down 2%, a cost-income ratio of 47%. Cost of risk was 41 basis points for the full year, including overlays and Russia. As Stefano will take you through, we are in the single-digits, excluding overlays and Russia. This led to a net profit of €5.2 billion on the UniCredit Unlocked definition. Our net profits are just only state of profit by AT1 and cash interest payment and DTAs. Our stated net profit for the year is €6.5 billion. Our 2022 return on tangible equity reached 10.7% despite being depressed by our 16% capital ratio before buybacks. This is already above our target return on equity in 24 of circa 10%. Please note that adjusting for the excess capital to 13% CET1 to be more comparable with main peers, our return on tangible equity reached 12.3%. Let’s turn to Slide 12. Our record result and new run-rate should also be considered in light of substantial headwinds and the action taken to secure the future. These include net of tax, €500 million of incremental overlays, which now amount to €1.8 billion gross of tax in excess of one full year’s worth of cost of risk. These overlays are critical to ensure our cost of risk is under control and will propel us in case macro environment is better than expected. In addition, we made provision to secure reduce our future cost of risk, €300 million of one-off integration cost and inflation relief, €200 million fully absorbed in TLTRO contractual charges and the related hedging impact, and €200 million of Russia negative impact on net profit, which we do not expect to replicate in 2023. Let’s turn to Slide 3 – 13, sorry. Our performance continues to improve across our three levers, surpassing all targets and delivering profitability above the cost of equity and outsized organic capital generation. Let’s turn to Slide 14. Our net profit growth has been enhanced by share buyback, nearly doubling EPS versus our historical run-rate with DPS 5x higher and tangible book value per share up nearly a quarter. Let’s turn to Slide 15. 2022 was challenging and our footprint suffered negative beta. However, we took the necessary difficult decision. Our team rose to the occasion and our business model proved resilient. Russia impacted our profitability. Our balance sheet portfolio and risk profile, but active management of the exposure reduced this gap meaningfully. The challenging macro environment was offset by rigs improvement and complemented the best-in-class management of the pass-through and acceleration of our insurance platform. We acted before inflation hit to further reduce our non-business cost and to streamline efficiency in our operating machine without reducing our intended investment. Hence, we have been able to more than offset this negative beta, absorbed a number of prudential actions to secure or indeed propel our future whilst meaningfully exceeding our net profit targets. Let’s turn to Slide 16. Our new enhanced profitability and continued capital efficiency action generated 280 basis points or €8.9 billion of capital organically in 2022, nearly double our target to UniCredit Unlocked run-rate of 150 basis points per annum. It also comfortably funds our proposed distribution of €5.25 billion, subject to shareholder and supervisory approval after absorbing all regulatory headwinds, Russia and adding close to 80 basis points to our best-in-class CET1 ratio, lending at 14.9% pro forma for distribution. To be clear, such number is expected to further increase by the end of Q1 and beyond, particularly as we do not expect any regulatory headwinds in the quarter. We continue to generate substantially more capital organically than our peers, while still distributing less than we make, demonstrating the prudence and sustainability of our distribution. Indeed, today, our distribution do not include any of the excess capital. Since 2021, we will have generated organically more than €15 billion of capital while distributing €9 billion to shareholders. This has contributed to the increase of CET1 of 120 basis points, whilst growing our top line by BRL3.2 billion or around 20%, absorbing 85 basis points of regulatory headwinds, 30 basis points from the shock of Russia and doubling our already conservative provisioning and overlays. We will have distributed over 50% of a starting market cap since the beginning of 2021 with a proposed 2022 distribution without denting our best-in-class CET1 rather continuing to substantially increase it. Consistently with UniCredit Unlocked, such excess capital to the upper end of our CET1 range of 13% shall eventually be either invested in value accretive and distribution accretive acquisition or return to our shareholders in both cases, supporting or increasing our future distributions. Let’s turn to Slide 17. Client solution enables us to offer all of our clients best-in-class content and products. The scale of this model means we can attract best-in-class talent and partners and provide a quality and wide range of solutions unmatched by local players to clients unreached by global players. Client solutions will continue to grow as we strengthen our factories organically and partnership wise, design and rollout new products and seamlessly integrate production and coverage. Client solutions reached revenues of €9 billion this year, up 5% year-on-year despite significant market uncertainty. Corporate solutions was up 11% year-on-year, part of which is driven by client risk management still reflected in our strong trading income. Let’s now move to our regions. Let’s turn to Slide 18. Italy. Italy continued its momentum, leveraging the foundation set in 2021. Gross and net revenues grew respectively 7% and 18% and were targeted to our segment of focus where we continue to strengthen our market share. Growth was driven by outstanding management of the rates pass-through slightly growing fee income, while improving asset quality and conservatively further increasing our best-in-class coverage, particularly given our proactive staging. The continued reduction in costs demonstrates that our strict discipline in this area was growing our top line, hiring, refurbishing our network and strengthening of our client services. Our cost income ratio in Italy improved meaningfully to 43.5%. The business continued to display excellent capital discipline, focusing on risk-adjusted client profitability, delivering an outsized organic capital generation of over 150 basis points and a ROIC that grew at over 17%. We continue to develop our digital offering, creating a digitalized platform to facilitate easy access for corporate to next-generation EU funds in partnership. Our commitment to supporting the clients and communities remain the priority with the continuation of the PerItalia offering as well as the provision of €2.5 billion in social loans. Let’s turn to Slide 19. Germany, few believed that Germany or indeed Austria, our two best rated countries representing 35% of our revenues would be able to produce double-digit ROIC or go above cost of equity. While both regions benefited from higher rates and a well-managed deposit beta, where decisive rationalization, renewed focus on growth and discipline on capital efficiency have step-changed their performance this quarter and for the full year and there is more to come. Germany grew gross and net revenue by 13% and 7% respectively, driven by fees while reducing its overall cost base by nearly 6%. This led to a ROIC of 11% and over 50 basis points of organic capital generation. Germany has truly transformed with more to come in 2023, a strong culture, passionate employees also so it named a top employer in Germany, the active support of our clients, including cementing ESG as a critical component to drive our business. Germany also took a market-leading position in green loans and led the way in the digitalization of green tech fundraising. Let’s turn to Slide 20. Central Europe. Similarly, Austria continued to outperform, contributing to the Central Europe region’s profitability. Overall, Central Europe gross and net revenues increased by over 15% and 20% respectively with the latter lending at €3.3 billion of sustained NII, thanks to interest rates, proactive management of the pass-through and quality volume growth. Service offering was further enhanced, for example, in consumer finance. Asset quality remained stable during the year. Costs were actively managed supported by organizational streamlining to prevent and minimize inflation impacts. Selective rollout of digital solution supported both revenue growth and cost efficiency. The region’s cost-income ratio dropped 8.7 percentage points to just over 46%. Ongoing capital optimization remain the core driver with risk density improved despite regulatory headwinds and in all countries delivering double-digit ROIC, which reached nearly 15%, up 3 percentage points year-on-year. The region generated 43 basis points of capital organically this year. Let’s turn to Slide 21. Eastern Europe. Despite a challenging year, Eastern Europe gross revenues were up 11% and net revenue by over 16% to €1.8 billion, driven by exceptional new business origination and interest rate active management, coupled with a solid client base. Fees were strong, up nearly 13%, supported by intensified transactional business and cross-selling. We recovered post-COVID market share well. Costs were managed exceptionally well while facing the highest inflation in our footprint with a focus on digitalization, automation and efficiency initiatives. Cost income was down 1.6 percentage points at 41%. Capital efficiency remained the key priority with proactive management of processes and risk models with the region delivering the first synthetic securitization in Bulgaria and in UniCredit CE and EE. Asset quality was solid with an improving NPE coverage. Overall, ROIC was 19%, generating 23 basis points of organic capital generation. Reflecting and responding to our clients’ desire for greater exposure around ESG, so the region become number one for corporate and green bond taking, a leading share of finance renewable energy as well as a strong positioning in the financing of solar, wind and recycling projects in the region. Let’s turn to Slide 22. Russia. At the end of Q1 2022, our total gross exposure to Russia was €7.4 billion, more than 128 basis points of capital hit in our extreme loss assessment, potentially bringing our CET1 to 13.3% pro forma for distribution. As of Q4 2022, just 9 months later, our total gross exposure to Russia dropped to €5.3 billion and the residual extreme loss assessment, which hit our CET1 ratio by 58 basis points, potentially bringing our CET1 pro forma for full 2022 proposed distribution to 14.3%. The difference in total gross exposure between Q1 and Q4 2022 is affected by an increase of €1.1 billion in our local exposure, mainly due to the ruble appreciation, partially obscuring the magnitude of the reduction of our cross-border exposure, about €4 billion, €1 billion of which in the fourth quarter alone. In conclusion, our local subsidiary has been resized, is liquid, well-positioned and well-capitalized. We decisively de-risked and resized our cross-border exposure, reducing it by two-thirds and local exposure both at minimum costs. Our cash exposure remains highly provisioned at 35%, while our intragroup derivatives are now fully collateralized. We continue to derisk our exposure to Russia. However, our remaining exposure is such that this will be seen as part of our business operation, not extraordinary measures. Therefore, we now consider our group numbers to include Russia going forward. For full transparency, we will disclose Russia separately in our divisional database. I will now hand over to Stefano who will provide more detail on our excellent fourth quarter and full year results.

Thank you, Andrea and good morning everyone. Let’s turn to Slide 24. Before I take you through the fourth quarter ‘22 results, please note that most of the following slides and the comments will be in a group, excluding Russia basis. This is meant for your benefit of comparison. We bought the preceding quarters and the guidance, which was given on this basis. As mentioned by Andrea before, going forward, we will refer to group numbers, including Russia, which we also show throughout the presentation and I will comment further contribution from Russia is relevant. My comments are based on a year-on-year comparison that is fourth quarter ‘22 versus fourth quarter ‘21, unless otherwise noted. Let’s now look at profit and loss in more detail, starting with revenue. Our commercial franchise kept its strong momentum supported by revitalizing power frontline and reflecting our focus of adding value to clients and delivering high-quality revenue. In the fourth quarter ‘22, we generated €5.4 billion of revenue, up 25%, thanks to net interest up over €900 million and trading up by a factor of 2.5x. Net revenue reached €4.7 billion in fourth quarter ‘22, up 35%. This mainly reflects significant net interest growth but also lower LLPs despite increased overlays in addition to higher trading results. Trading for the group, including Russia, which had again a strong result of €100 million with €0.6 billion in fourth quarter ‘22. Excluding Russia, came in at €0.5 billion as we supported our clients in defending their business outcome in this volatile environment. The lion’s share is client-driven supported by client hedging revenues, which is up about €140 million year-on-year, notwithstanding a negative XVA impact of about €60 million. Treasury is up €40 million year-on-year. Let’s turn to the next slide. Net interest income was €3.2 billion, up 42% quarter-on-quarter or about €950 million, driven by higher loan rates, by the benefit of rising rates on the investment portfolio and the overall positive TLTRO impact, more than compensating the negative implication on term funding and higher remuneration for client deposits. TLTRO contributed €0.4 billion to net interest income in the quarter, including €0.5 billion positive one-off from TLTRO accounting recognition and around €0.4 billion negative impact from hedging derivatives following the TLTRO contractual changes. Average client loan volumes relevant for net interest are down €3 billion in the quarter, driven by Italy and Germany, mainly short-term loans for corporates and small medium enterprises, while we are still growing in Central and Eastern Europe. Loan volumes are supported by €4.7 billion in USG lending in the quarter as we continue supporting our clients during transition. Average client loans are up €15 billion year-on-year, focusing on profitable clients despite active portfolio management, including the reduction of low-performing businesses. Customer loan rates are up 61 basis points in the quarter across our regions, leveraging on higher interest rates and thanks to our commercial actions. These also include careful management of our deposit beta limiting the increase of customer deposit rate to 23 basis points in the quarter, while the average Euribor 3 months was up 129 basis points in the quarter. While expected to rise deposit EBITDA defined as a percentage of short-term interbank rate pass-through to cash on deposit rate remains below historical levels. This is especially true for Italy, where we are the highest stock of deposits and the customer deposit rate is only 11 basis points higher in the quarter at 13 basis points. Average commercial deposit decreased by €2 billion in fourth quarter ‘22 as growth in Central intern Europe only partially compensated lower deposits in Germany and Italy. The decrease was driven by single tickets of core presence on medium enterprises, whilst retail deposits were up. Average client deposit volumes are up €23 billion year-on-year. This year, we expect deposit volumes to be broadly stable, focusing on the deposit EBITDA and loans to be slightly up, concentrating on more profitable capital efficient loans. Let’s take a closer look at our net interest outlook and sensitivity on the next Slide 26. We have updated the managerial net interest income guidance and sensitivity based on conservative deposit beta and rate assumptions. Based on a 2.5% ECB deposit facility rate starting at the end of first quarter ‘23 and are remaining stable thereafter, this being below the current for rate and deposit beta around 40%, we expect an updated full year ‘23 net interest guidance, including Russia, of over €11.3 billion. Given that no contribution from TLTRO tiering nor excess liquid fees, which was €0.8 billion in full year ‘22. Russia’s contribution to net interest in full year ‘22 was €0.8 billion, which is expected to materially decrease in 2023 as we deleverage. In the coming quarters, higher rates are expected to positively impact the net interest contribution from loans and financial assets, while having progressively a negative impact on funding in particular deposit where the level of pass-through has been very well managed so far. This depends on the evolution of the deposit beta. Therefore, you can simply annualize the fourth quarter ‘22 net interest income. The observed deposit beta for the group for both site and term deposits in fourth quarter ‘22 was about 20% in Italy only 7%. Our full year ‘23 guidance and sensitivity conservatively assumes a deposit EBITDA around 40%. As a consequence, we assume impact to net interest from EBITDA increasing is greater than the assumed contribution from rates. The net interest income sensitivity for a further ECB deposit facility rate increase of 50 basis points from 2.5% to 3% is above €0.3 billion, which also depends on our clients’ behavior and competitive dynamics develop. Let’s turn to Slide 27. Fees in fourth quarter ‘22 are down 4% year-on-year due to lower investment and financing fees, partly compensated by transactional fees. Elevated volatility and the macroeconomic backdrop impacted negatively client sentiment and activity and as a consequence, investment and financing fees. Let’s look at the component part of fees year-on-year development in more detail. Investment fees were down 10%, as lower market levels, combined with conservative client portfolio management led to lower assets under management upfront fees and more than 10% reduced assets under management stock, net impacted management fees. This is partly mitigated by better asset under custody fees, thanks to certificate placement. Certificates are a good example of development products to meet our clients’ needs across market conditions while helping to protect our fee income. Investment fees quarter-on-quarter, are up 4% to asset management upfront fees. Financing fees are down 10% as capital market specifically ECM and DCM were negatively impacted by volatility. Loan fees slowdown, mainly in Germany and higher circulation costs as expected by active portfolio management strategy. Fees for guarantees were up. Transactional fees were up 6%, thanks to payment and card fees, driven by client activity across division and property and casualty insurance growth in Italy. Please consider that client hedging fees are booked in trading, as mentioned earlier. In fourth quarter ‘22, that stood at €0.2 billion, up 16%. Full year ‘22 fees are up 1% compared to last year including the client agencies that would be up 3%. Let’s turn to Slide 28. Fourth quarter ‘22 costs came in at €2.4 billion, flat year-on-year. Thanks to our strict discipline, full year ‘22 costs stood at €9.3 billion and were down 3%. while inflation in our footprint, excluding Russia, was about 9% in 2022. The result is significant operating leverage with a full year ‘22 cost-income ratio of 49% and an improvement of 6 percentage points versus the year before. The cost income ratio in Germany improved by an impressive 10 percentage points in Asia by 8 percentage points both countries with double-digit return on capital. Let’s take a closer look at HR and HR cost development. HR costs up 2% year-on-year. We supported our employees across the region to better cope with the challenging economic situation by paying €80 million of inflationary relief. Excluding these, HR costs will be down 3%. HR costs are benefiting from lower FTEs down 4% as we focus on rationalizing non-business rated activities while maintaining investment in key areas. Last year, we hired over 1,400 FTEs for the front line and strategic areas like digital, where we continue to invest. Non-HR costs are down 4%, thanks to lower use of external consultants and credit workout expenses as the usual cost seasonality in the fourth quarter was kept at day, thanks to very frequent management and structural cost reduction initiatives throughout the year. Real estate costs were flat, thanks to more efficient maintenance spending and optimizing our headquarter footprint. Cost discipline is part of our DNA, and that will not change. So you can expect us to do a good job in managing the impact of inflation and structural cost improvement will help us to do so in ‘23 as well. Let’s turn to Slide 29. Cost of risk excluding Russia was 66 basis points in the quarter, almost entirely driven by further strengthening of our overlay provisions protecting future profitability. Full year ‘22 cost of risk at 23 basis points was below our guidance, supported by our still low default rate at 0.9%. As mentioned by Andrea before, our overlay LLPs on performing loans have increased to around €1.8 billion, about €0.5 billion higher than the quarter before to be used for any shocks or to be released in the following 2 years. We are reassessed all overlays, releasing €0.9 billion largely related to COVID-19 moratoria and billed $1.4 billion of new gross overlays, a precautionary measure for intake clients in light of the inflation and for enterprises in energy intensive sector. Existing overlays are equivalent to over 1-year cost of risk of our UniCredit Unlocked guidance. We also performed our annual IFRS 9 macroeconomic assumption update, increasing provisions by about €0.3 billion. Our updated spillover analysis confirms the soundness of our group risk profile, which you can find in the annex for more detail. Both expect the losses on stock at 35 basis points on new business at 26 basis points also confirm the credit quality of our performing portfolio and our discipline is ingrained in our organization. Full year ‘22 RFPs for Russia are about €0.9 billion, while in fourth quarter ‘22, we released about €100 million, mainly related to repayments and volume reductions confirming our conservative approach to provisioning. Cost of risk, net of Russia and additional overlays was single digit at about 7 basis points in full year ‘22, even lower than the year before. Let’s turn to Slide 30. Our underlying asset quality remained robust. Gross NPEs at €11.9 billion, reduced by €5 billion year-on-year. Our gross NPA ratio is down 21 basis points quarter-on-quarter. The net NPE ratio is stable on a low level at 1.4%. We will continue to pursue opportunities to reduce our NPEs as economically appropriate and value-creative terms including NPE sales. In fourth quarter ‘22, we sold €1.2 billion, which is the main reason for a 2.2 percentage points lower NPE coverage ratio at 47%. Remember, we have a favorable mix of our NPE stock with a high share of about 80% UTPs and past due. NPE coverage does not include overlays non-performing loans which come on top with our strong asset quality, high level of provisioning for NPE and overlay LLPs, we are uniquely positioned to absorb macroeconomic impacts. Let’s turn to Slide for 31. For quarter ‘22, we produced €2.3 billion net operating profit and a record stated net profit of €2.4 billion. At the same time, we’ve taken actions and corresponding charges to protect our future profitability. In the fourth quarter, we did €0.5 billion additionally overlays LLPs, as mentioned, and also booked €0.3 billion integration costs, mainly in Italy and Germany. Additionally, we took €0.3 billion impairment of participation in profit from investment in Russia, but also Austria. This was partially offset by positive €0.2 billion for the completion of the rationalization of the shareholding with CNP Assurance as announced in the second quarter. €0.1 billion profit from investments shown on the slide is excluding Russia. The quarter benefited from tax loss carryforward DTA write-ups of about €850 million, thanks to improved long-term profitability expectation in Italy, but also Austria. Leading to a low effective tax rate, the group tax rate excluding any potential tax loss carryforward DTA write-ups is expected to be slightly below 30% in 2023. Net profit, as defined our strategy day adjusted for DTA write-ups and after cashes and additional on coupons came in at a strong €1.4 billion, delivering a return on tangible equity of 12.2%. The coupon on CASHES related to full year ‘22 results is expected to be paid based on preliminary figures and subject to the relevant approvals. We concluded the €1 billion second share buyback tranche for 2021 in the quarter for 87 million shares, equal to 4.3% of share capital. Together with the first share buyback tranche, we repurchased and canceled the equivalent of about 11% of share capital, which is highly accretive for EPS. Let’s turn to Slide 32. In fourth quarter ‘22, our risk-weighted assets, excluding Russia stood at €292 billion, down €10 billion quarter-on-quarter, driven by continued active portfolio management measure worth €6 billion with a focus on securitization and reducing low-performing businesses and €8 billion of business dynamics affect by counterparty and market risk reduction as well as lower loan levels. This allowed us to absorb €4 billion credit risk-weight assets as we finished implementing the EBA guidelines. Risk-weighted assets related to Russia, €16 billion are down €1 billion quarter-on-quarter mainly thanks to the ruble depreciation and further after deleveraging more than compensating negative effects driving from a conservative internal sovereign rating downgrade. Net revenues on average expected asset at 6% in full year ‘22, up 0.9 percentage points compared to last year. Over the course of full year ‘22, we achieved a total of €19 billion of risk-weighted asset reduction via active portfolio management. Efficient capital allocation remain a priority focus to manage risk-weighted assets enhancing the return on capital and supporting organic capital generation. Let’s turn to Slide 33. The CET1 ratio came in at a very strong 14.91%, up 78 basis points compared to last year even pro forma for a much higher €5.25 billion proposed older distribution, thanks to an outstanding organic capital generation of €8.7 billion, excluding Russia, This equal 271 basis points, very well above the 150 basis point target in our plan. In full year ‘22, we generated 181 basis points from net profit and 90 basis points throughout our proactive risk-weighted asset management way ahead of our plan. This also allowed us to absorb 14 basis points regulatory headwinds and about 31 basis point negative impact from Russia. Net profit, including and excluding Russia, notwithstanding additional €0.7 billion over legality and €0.3 billion integration cost is significantly beating our ambition for full year ‘22, supported by all regions achieving double-digit return on capital. I will now hand back to Andrea.

Thank you, Stefano. In summary, while we still have a long way to go to fully unlock UniCredit, we’re already visibly different, better bank. Our stepped-up run rate is the evidence of this. Looking forward, we expect our commercial franchise to build on its momentum as our product factories continue to develop with increasingly affected local client coverage. We now focus on transforming our operating machine, which is expected to unlock substantial additional value over time. Our goal remains singular to continue to deliver profitable risk-adjusted growth and outsized capital generation to support distribution to investors through the cycle, whilst maintaining our unfailing commitment to acting in the right way so that we can fulfill or purpose of empowering communities to progress. Let’s turn to Slide 35. Structural changes have stepped up our profitability with gross operating profit up 29% versus average historic levels. Our €450 billion loan portfolio is solid, cleaned up with limited exposure to high-risk sectors and conservatively staged and covered. Our NPEs are improved in quality with over 70% GDP. Our coverage on Stage 1, 2 and 3 loans is much above peers after we moved €26 billion to Stage 2 at the end of 2021. We have taken over days to the tune of €1.8 billion, increasing them by a further €0.5 billion in Q4, which is equivalent to our cost of risk to more than our cost of risk of 1 year. We’re strict on new business, balancing risk profile with commercial activity to preserve asset quality from macroeconomic impacts. Should the cost of risk increase to above our expected 30 to 35 basis points or more than sufficient overlays are expected to compensate keeping it stable. Should the cost of risk remain benign as it has been in these 2 years. And depending on the macroeconomic outlook, the entirety of our overlays should be released over the next 2 years, propending results and cost of risk is for us a tailwind at this point. Let’s turn to Slide 36. Turning to our group guidance. Following full year. We assume a mild recession scenario and include Russia. We expect net revenue to be over €18.5 billion. Fees will be down slightly year-over-year due to a rising cost of securitization and a one-off impact of the removal of current account fees in Italy now that we are in a positive rate environment. This will occur in the second quarter and will be a magnitude of a couple of hundred million. Otherwise, we expect fees to remain broadly flat. We do not guide for trading revenue, but we do not expect a continuation of a very elevated levels of 232, given the less volatile backdrop anticipated. As Stefano has explained, our NII guidance is for over €11.3 billion and based a prudent assumption of both rates and pass-through. Costs will continue to be managed tightly, and we expect the cost base to be equal to or less than €9.7 billion, keeping it significantly below and assumed inflation in our perimeter of over 7%. We have spoken about our cost of risk, which we’re highly confident will remain at or below the 30 to 35 basis points range. During 2023, we expect systemic charges of around €1.2 billion. Net profit for 2023 is expected to be broadly in line with 2022, meaningfully rebasing our expectation of what we can deliver sustainably and build upon. We aim for 2023 distribution to also be broadly in line with 2022, supported by our expected organic capital generation and net income and still not including the distribution of our excess capital. Thank you. And I will hand over to the moderator for Q&A.

Thank you. [Operator Instructions] The first question is from Chris Hallam with Goldman Sachs. Please go ahead.

Yes. Good morning, everybody. And thank you for taking my question. The business is clearly performing well and performing ahead of expectation set UniCredit Unlocked. And I just wondered if we think about Slide 7, is there a scope to reinvest some of that outperformance back into the business in order to accelerate or expand the operational improvements embedded in the plan? And if so, where would the focus of that reinvestment be? That’s my first question. And then secondly, Andrea, you gave some color at a conference late last year on the outlook for M&A in the sector. I think at the time, you were flagging political uncertainty, macro uncertainty and also volatile valuations as obstacles to seeing more deals in this space. I guess, with the improvement in valuation across the sector and a slightly more constructive view on the macro, does that change your view at all on M&A?

Okay, thank you. So reinvestment, Slide 7, so in UniCredit Unlocked, we had clear reinvestment into the business and into our operating machine. So the view was, if you remember, that we could extract €1.5 billion of cost reduction and reinvest the majority of it into either frontline, which had been depleted for the operating machine. That has not changed and is continuing. Obviously, the benefit you see from that investment takes time to fall through the P&L. But that’s why we’re saying that if you look at the results today, I would say that the large majority, say, 80% of the improvement of results is a commercial machine stepping up and driving part. 20% is the structural change coming through. As we move through the plan, clearly, the commercial machine cannot continue to step up at this pace, but we hope that the operating machine, improvement in efficiency and then support to the commercial machine leads to better results still. So that’s how we look at it. So we will continue to invest to be able to achieve that objective. With respect to M&A, I think we still have a relatively uncertain environment. I do think that, that vision has become more better. But M&A is about three things. One, does it strategically fit? And does it reinforce you that the structure improves your position? Two, is their seller and three, do the values makes sense? And usually, you collide on two and three. So for M&A to take off, there needs to be willing sellers and that relative valuation that makes sense. So far, at least for us, it hasn’t been the case.

Okay, thank you.

Thank you.

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

Hello. Good morning, thank you very much for taking my question and for the presentation. I was thinking in terms of the guidance for 2023 net profit, it remains in line with the €5.2 billion achieved already in 2022, as you were saying, considering this year was already marked by provisions for Russian exposure somewhat weighing on the earnings. Going into 2022, you’re saying you’re expecting, of course, strong net revenues and even give room for further upside coming from more rate hikes beyond the deposit facility rate reaching 2.5%. So in this context, what would you therefore be thinking in terms of headwinds that you’re cautious on for 2023? Do you see any downside risk from current headwinds or is there more risk in terms of cost of risk? And then the second question is a follow-up on what Chris is saying. The agreement you recently signed with Azimut in Italy includes a call option. Within this context, can you give us some color around your thinking for inorganic growth in the asset management space? Would you be willing to deploy some of the excess capital by starting to build an in-house factory for Italy, particularly thinking of now European regulations could be evaluating requests for an inducement then? Thank you.

Thank you. Let me start with the second one, and then I’ll go to headwinds, and I’m sure Stefano will complement it. So Azimut, let’s take a step back. If you look at our factories, and it’s important to understand that we view our factories are as serving our existing clients. So to make an example, buying an asset manager that serve institutional clients and provide us with product is not exactly consistent with that, if you take 2024 and the potential review of incentives and inducement and all of that we are in a position to fundamentally reinternalize everything. We would have a position to have a developed factor with Azimuth. We have in a position to reinternalize our life insurance platform, etcetera, etcetera, etcetera. So regardless of what the environment is with respect to inducement, with respect to the compromise, with respect to whatever, we will see what it is. If it makes sense, we will reinternalize. If it doesn’t make sense, we won’t. In terms of more generally the factories, we will continue to strength the strengthening a first in two ways: One, hiring talent that is very happy to come and work here because we can provide them with a career over the entire European unit. At the same time, advanced strengthen organically our factories. This is the case, for example, in advisory and capital markets. At the same time, we will continue to look for partnership to complement our skill set in factories where we’re clearly not best-in-class and cannot be and to complement our client base by providing access to their clients. That will continue. And I think goes, we will continue to do that. It also happens that this strategy is not very intensive in capital. Yes, if I internalize certain things in ‘24, I will have to spend some capital, but a lot less on what I would have paid from doing an acquisition externally. With respect to headwinds, that’s a good question because we’ve tried in through the year, but in fact the first quarter to anticipate what they could be. If you take our strong belief in a shallow recession, obviously, we should not have €1.8 billion of overlays. We should not have a number of the other provision we have made. But we have tried to see what can go wrong. So what can go wrong? Cost of risk. Of course, it can. But now we feel we’re bolted with it. And therefore, for us, we don’t see it as a significant risk unless you have a very extreme scenario, then we have another problem. What can go wrong is a risk environment that is not as aggressive as some people think, i.e., where ECB does not raise the full way to free or both. But our assumption improve that we – on the rate scenario only include 2.5%. We’re already there. What can go wrong is a pass through our deposit beta, but worsened significantly and that our experience in flight-to-quality on deposit does not materialize. Now we’re doubling the deposit EBITDA from €20 million to €40 million, so in our projection. So we’re bolted on that. What can go wrong is inflation and the impact on cost. We are ready for 7% in our perimeter. Remember that our cost this year include €80 million of inflation relief, which obviously we review contracts of our colleagues are not needed anymore because we’re doing it through contract. So net-net, the neutral. We – so we’ve looked at cost in a in that perspective, and we started from June to rationalize further with respect to both internal, but especially external cost. And we’re now positioned to do that. Realize that a lot of the efficiencies we’ve done have been done after the half year mark. So it don’t flow through the entire cost base the savings of 2022. They will flow through in 2023, and we are continuing in 2023. We’ve looked at fees. We told you that in our fees, in Italy, we booked €200 million for fees on accounts for negative rates. Effectively, those are offset by the NII. If you take those off, we think were flat. And if you look at we have started the year from the base of last year, we’re constructive on investment. We have run rate on protection. We continue to crystallize on payments. So there is nothing that leads us to believe that we go further backwards. But we have – in our expectation we have put a flat fee environment. Trading is one, but I cannot comment, honestly, because they can go lower. But we have all the other levers to have just above against that. Have we missed anything else? We might. But I think we’ve tried to go through down the list and build differences as much as we can. Consider also that in our 2022 results, we have a minus €200 million impact on net income from Russia, incidentally coming down from minus €900 million in the first quarter. So we clawed back €700 million. We don’t think we are going to have a minus in Russia this year. So I think that’s what we see. Obviously, with the uncertainty the geopolitics and the transformation that we are all undergoing, some things can go wrong, but we have tried to address as many of these points as possible. Anything else?

No, I don’t think there is nothing more than what Andrea already commented, maybe a couple of data points more. Andrea highlighted in relation to inflation, so 7%, just to give the flavor is around €500 million in bad debt cost in ‘23 in relation to inflation increase that is already embedded in the guidance that we gave for cost below 9.7%. And we are reiterating this because it’s really important. €1.0 billion overlay is more than 1 year cost of risk. So that is sufficient in order to cope also with scenarios that are worse than a milder recession scenario.

Very clear. Thank you very much.

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

Yes, good morning. One on profitability in the future and one on capital allocation. €5.2 billion of net profit post [indiscernible] targets in the double-digits after accounting for a better rate environment and low cost of risk. What do you think is the mid-term profitability prospects from there? And on capital, with the new guidance on shareholder remuneration, you would only have less than €2 billion cash that’s left on 2024 earnings to hit the plans €16 billion cumulative capital return. You clearly got tied, but how do you look at the material remaining capital access and when are you going to adjust the strategy versus the UniCredit Unlocked? Thank you.

Alright. So just one thing, Andrea, you broke up when you were talking about the €5.2 billion net income. Can you repeat your question on that please?

Yes, sure. €5.2 billion net profit guidance after [indiscernible] for ‘23 given the Unicredit Unlocked target in the double-digits accounting for rates and low cost of risk what is the mid-term profitability prospect from that level onwards? Thank you.

Okay. So in terms of net income, we have, as you said, €5.2 billion, including Russia and including Russia means €200 billion negative, excluding €5.4 billion. And it is a €5.2 billion that includes 41 basis points of cost of risk for the year. But the 41 cost – 41 basis point cost of risk of the year is inflated by obviously, Russia and overlays. As Stefano said, without that, we were at 7%, okay. So as you go forward, what is the normalized? For the time being, we feel comfortable we say broadly in line. There are like in everything, potential upside and downside. We feel that this view is tilted to having more upside than downside, but we will see it’s premature for us to tell you. And it’s tilted to have more upside than downside for how I responded before all the lines of difference and all the things that can go wrong that we have protected against. Now with respect of where are we going forward from that, it very much depends to where rates stabilize, where the pass-through stabilize and then how fast the benefits of our transformation can come through the P&L. And I think on that, that’s why we are doubling our efforts on that. Let’s see how much we can achieve during the quarters of this year, and we will keep you posted. But clearly, our ambition is to step up from this again. I don’t know how fast we will increase further. It depends on our execution. But the value to unlock is still there. I don’t think we are done, not even close to being done. With respect to capital and cash and everything else, so I think we started by saying at UniCredit Unlocked that we would be generating about 150 basis points or €4.5 billion of organic capital per year. And therefore, that would be supporting sustainably distribution of an average in excess of €4 billion a year, which all of you have crystallized into the famous €16 billion. At this point in time, we are running at an organic capital generation that is much higher than UniCredit Unlocked, which is why we are creating capital. It was much higher in 2021, about €6 billion. It was much higher in 2022, about €9 billion. So, you are talking between 30% and now 2x of the average. The organic capital generation is linked to two drivers. One, my net income and how efficient I am with the capital I deployed to achieve it, the famous capital light and so on. And two, the process of rationalization and improvement of capital efficiency in my backpack, the €456 billion. The second one, at some point, we will finish. It’s not a perfect read. The first one is we will reach a run rate and then we will be very efficient and profitable, and we will continue. If you had asked me at the moment of UniCredit Unlocked, our target of organic capital generation, so this efficiency was about €20 billion over 4 years. That’s why we see it in excess of €16 billion. Today, we have done €9 billion. And on the one hand, we have eaten into those €20 billion over €16 billion. On the other hand, we have become more bullish on how much is the total that we can achieve as our organization now leaves endures capital efficiency and profitability as they did volume before. So, I don’t know the exact numbers, but I think we will go beyond. Other question that is linked to that, so I do think that if you look at ‘23 and ‘24, we are holding. There is absolutely no question, we will be there. If you go beyond those 2 years, then there is the topic or even beyond this year than there is the topic of excess capital. It’s clear, and I said it at UniCredit Unlocked that by the time we get to the end of the plan, I can’t look at shareholders and say this is a model that should run at a substantial excess to our target of 12.5%, 13%. When I said that, we anticipated to be at 13.7%. Today, we are at 14.9%. So, now we have very substantial excess capital that needs to be returned. How will it be returned, I answered the question in a way before in two ways. Either we get convinced that there are no out there value and distribution accretive acquisition because valuation of the targets are too far away. Then we will integrate our distributions going forward by distributing back the excess capital, like many other banks do, or in my opinion, better if we can execute value and distribution accretive acquisition, we will invest that excess and feed further the growth in distribution by supporting it with the organic capital generation we will from those acquisitions. That’s how we look at this. So, for the time being, ‘23, we think we are relatively bolted, ‘24 also. As we go towards the end of the plan, either we find new efficiency and we distribute over some time, the excess capital or we find new efficiency, and we employ that capital in an accretive way. And this is the way we look at long-term sustainable growing distribution underpin by organic capital and profitability. I hope it answers that we can talk about it further later.

Thank you so much.

The next question is from Antonio Reale with Bank of America. Please go ahead.

Hi. Good morning everyone. It’s Antonio from Bank of America. I have two questions for me, please. One is a follow-up on strategy. And the second one on the deposit pricing, please. So, if I look at your numbers and go back, you presented the plan, including capital buffer embedded in your 12.5%, 13% target range. And I hear your comments. And clearly, you continue to prioritize capital distribution. You have a lot of buffers there not just on capital. And you seem to be generating more than you can distribute whilst absorbing unexpected shocks. So, my question is, where do your strategic priorities stand here at this point of the rate cycle with respect to some of the use of an allocation of excess? Where across your footprint, do you see the greatest opportunity to deliver the capital? And how should we expect the shareholder remuneration mix to change going forward? Would you be willing, for example, to introduce interim dividends? That would be my first question. And secondly, on deposit betas, I have seen you have increased your assumptions from 20% to 40%. But I am more interested in sort of exporting your Pan-European viewpoint. What are you seeing from competitors and from your client base when it comes to deposit pricing? You have talked about lower current account fees, which I guess is the first natural step. I wonder how you are thinking and what you have seen in terms of corporates and weaker clients across your key geographies? Thank you.

Okay. With respect to capital, I think I mostly answered before, but fundamentally, we believe that a target of 12.5%, 13%, while higher than the peer group is a prudent and solid target, and we stick to that, notwithstanding regulatory headwinds that implicitly increase those numbers. With respect to the excess, especially given the magnitude of the excess I fully understand it’s a topic, and I fully understand that we need to answer that topic. So, for the time being, that access is absolutely not needed for us to continue to step up our distribution as we have this year and compensate our shareholders in at a magnitude that is commensurate to what we think is right. But at some point, not in 5 years, but in the next 2 years, we need to also articulate how this capital will be employed. And the employment will be either to be returned to shareholders progressively, complementing the ordinary distributions or employed into acquisitions that then would generate additional organic capital generation to increase the distribution, including on a per share basis. So, this is what we do, and we need to articulate it better. But I think after a year of operation on the UniCredit Unlocked, it’s a bit premature to give you exact timing and numbers. With respect to deposits, and I will then turn to Stefano, I would say this. So, if you look back to 20 years, every time there is a shock or a recession conflict potentially public belief UniCredit becomes a flight to quality. In every market, we have depositors, we have clients that come to UniCredit, every time in the last shocks, UniCredit manages in a value creation manner, the pass-through of the deposit beta and benefits on margins more than proportionally on that. In our numbers, we have a different thing. We have taken a conservative view that the deposit beta moves from 20 to 40. But just to be clear, if I look at my deposit beta in Italy, which is one that I know particularly well, given my new job, it was at 7% last year, it is up 7% in January. So, let’s see what we do, but the behavior of clients, both families and corporate is a behavior where we remunerate, let’s say, fairly, but the flight to quality and everything else that we offer is priced into the path through that is particularly positive for us. For the time being, that’s what we see. But Stefano can add to that.

Yes. So, it’s important to distinguish by country and by segment. So, before we are commenting, first of all, the overall kind of beta is 20% but importantly including both sides and term deposits. That’s very important because the side deposits on beta is even lower than that. Then we were commenting differentiating Italy in comparing with the other countries. We are commenting that Italy were at 7%, 7%, while on the other country on average, we are around 30%. Within that, let’s open it a bit, and then I will comment in relation to, let’s say, the competition. So, the retail [ph] to give you a flavor is fairly lower. So, the retail in Italy is 3% on the deposit beta. Corporate on the other hand, the group is currently above 30%. This is also depending on one end from the client behavior and the competition, i.e. so far, the client behavior is better than expected and is clearly showing a different competition on corporates mainly. And this is also reflected in the dynamic of the deposit that I was commenting before. So, when I was commenting that were the reduction of deposits, primarily in Germany and Italy due to large corporates small, medium enterprises, this is why we have decided not to follow-up with pricing that we think are not appropriate, i.e., the situation of the group in terms of liquidity such in other country, that the focus on the beta was such that if there is no need of liquidity, we will not change the pricing. So, coming to that, the competition is a little bit more on the corporate. For the time being, we are not seeing an important competition, especially in Italy on this side. Fact to be said, that we need to look during the course of the year, especially in the second part when there will be the full reimbursement of the TLTRO. That’s why we have decided to have conservative assumption also looking to the historical behavior in relation to the planned beta.

Thank you.

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

Good morning. Thanks for taking the questions. My first one is on Russia. Just wanted to get a bit of an update on the deleveraging process and it looks like you are not expecting big impacts, but just as you know, now that the targets are based on the group, including Russia, again, I mean should we assume that the exit of the sale is off the table for now? And then my second question is on the costs. Just wondering and I know you have mentioned €500 million increase in inflation. I am just wondering specifically for it to be and what are you anticipating in terms of wage increases? Thank you.

Okay. So, with respect to Russia – sorry, with respect to Russia, there is absolutely no change in strategy. We continued to de-risk, and we did that decisively trying not to leave too much money on the table. The only reason why Russia – by the way, Russia was never deconsolidated. We just presented the results separately because given the magnitude of the rationalization and the uncertainty and the volatility, we wanted to allow all of you to see how the rest of the franchise was continuing to progress, while and focus on how we were rationalizing Russia. As we end 2022, Russia is resized. It’s highly rationalized. I mean last year, we compressed costs aggressively. We compressed the balance sheet aggressively. And now, it is in a place that because of its size, and because of what we expect in terms of volatility, it can be absorbed in the normal course. And therefore, having the difficulty of every quarter and every guidance today be accent with, we are simplifying, while providing you all the details on Russia. But the line of travel does not change. And I would like to underscore that relative to anything and everything, we set a strategy at the end of Q1, in terms of de-risking. And I do think that for those who have followed the same objective, we have de-risked more aggressively and more and faster than anyone else, leaving on the table, almost no money, which was the objective. And we will continue to try and do that. So, expect us to continue to de-risk with the rest €1 billion in Q4, obviously, at some point because the magnitude of what we have has compressed, we can’t continue to shrink at that size all the time, but you should expect us to continue to de-risk.

Right. In relation to cost, the €500 million was allotted before are also including the salary drift. The salary drift will be differentiated country-by-countries. We will not have the new agreement in Germany, because that will be relevant for 2024. So, in a way the 2023 costs are secured, why we started discussion in Italy and Austria. In general the salary drift will be below, however the level of inflation that we are assuming for each country. And in general, please take into consideration that taking the actions that were already secured, the average FTE will be down for around 3% or so during the course of 2023. So, this is an important element to be considered as mitigating factor of the salary drift dynamic.

Thank you very much.

The next question is from Azzurra Guelfi with Citi. Please go ahead.

Hi, good morning. I have two questions for me, one is on asset quality and one is on lending rate. And when I look at the guidance that you have given, I understand is ex-macro overlay. And I understand all the cushion and cautiousness that you are including, but that is the biggest difference versus consensus. So, clearly the market is more conservative than you are on the supporting environment. Can you give us some reassurance on how you see on the ground in terms of corporate space, especially in this in Italy or the corporate space in Germany, of how the situation is developing in terms of asset qualitative studies, any area that you are seeing some signs of deterioration and how you are approaching this? The second one is on the lending. When I look at the Slide 26, when you talk about your further upside on NII, the lending positive impact, it’s lower than the negative on the deposit beacon. So, I was wondering if you can give us some color on the interest rate, pass-through rate on the lending side that you are seeing. And whether there is any pressure point on SMEs or corporate space in terms of re-pricing given the macro developments? Thank you.

So, I am going to start and then pass it to Stefano and let me take asset quality. So, on asset quality, I think firstly, I think it’s always very important if you take away overlays and everything else to see what is the starting point. When you hit a shock or a recession, what will drive you through or not, is the quality and the coverage of your existing loan book. We move about a small fraction of that loan book every month. If a €456 billion are high quality, highly covered, prudentially staged and everything else, whatever happen, you will have a lower cost of risk than most. If you are not, you are going to skyrocket. If you look at the fact that our cost of risk continues to remain in the single digits, 2 years in a row, when you eliminate overlays, Russia and everything else, it demonstrate that actually we have a very defensive existing portfolio. So, that’s point number one. Point number two, what do we see in the market going forward. As of now, we don’t see any meaningful worsening of let’s say risk indicators, not in terms of expected loss, not in terms of anything. So, for the moment, we are in a position where plus-minus, we are at trend line. Can that worsen, of course it can. But for the time being, it hasn’t. And for the – and if you expect a mild recession, the worsening is not that sizeable. And that’s where the overlays come into play. But that’s the way I look at it. But please, Stefano?

Yes. So, let’s start from the default rate. So, the default rate for the full year as I was commenting is 0.9. It’s lower than 1 in Germany, because it’s 0.5, is around 1 in Italy and Central Europe, a little bit higher in Eastern Europe. In our assumption, we are assuming the default rate that is above 1, but it’s not significantly above 1. What we are seeing on the ground as [indiscernible] is that not only we are not seeing a situation either on retail and corporate that are bringing us to classification, but also, so far your early warning indicators are constructing. One important point however to be mentioned is that, we are continually running through the spillover analysis and the spillover analysis is confirming that only around 1% of our total portfolio can be considered IRAs for the intern intensive standpoint. With regards the – in general pass-through re-pricing because your question was in relation to the asset side, so on the loans. On the loans side, if you look the client rate, on average were up 60 basis points. That’s the client rate in the quarter and we are up in all the countries. Fair enough on this spread, especially in country like Italy spread meaning a net of the cost of funding right. There is a spread compression. And that’s why we are conservatively assumed also for 2023 a spread compression on some basis points. So, it’s not a lot, but there was some basis point. We do think that it will take a while to re-price also on the asset side. Like there is a delay on the liabilities side, it will be the same on the asset side. Such as spread compression is more in Italy and Germany, because in Central Europe and Eastern Europe, especially in the country where the interest rates movement started before the re-pricing was already happening.

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

Hi. Thank you. Hugo Cruz from KBW. Two questions, one on capital and one on OpEx. In capital, can you remind us if there are any regulatory headwinds to come in 2023? But also, is there any material benefit from portfolio management in 2023? And then on OpEx, I understand a big part of the bank’s plan was to rationalize the usage of external providers, IT providers. How is that process going? Can you give us any KPIs? And are you seeing any different inflation dynamics between the external and internal IT providers in the group? Thank you.

Thank you, Hugo. So, on capital, rec headwinds, nothing meaningful. We rolled out EBA in our models a long time ago. So, we don’t get those or not meaningfully. We have got some from Austria in the quarter, but nothing meaningful in 2023. And in terms of organic capital generation, we still expect for it to be significant. But obviously, it’s difficult to keep it at 300 basis points per year. So, don’t expect €9 billion of organic capital generation every year. It just at some point it stops, right. But I just need – we just need to be at 150 basis points or above. And I think we are determined to do that. With respect to cost and external providers and everything else, so that for UniCredit it is both a challenge and an opportunity. Challenge, we are very externalized and external cost flow through much faster than internal cost. However, it’s also an opportunity because as we internalize and rationalize all these external providers, our ability to reduce cost is more significant. And we have proven that throughout 2022. And we are going to do that even more in 2023. So, I think that’s the external part of our cost base. The internal part of our cost base, just to be clear, and repeat what Stefano has said, we took some synergies in reductions and in streamlining internally. Some of them are not fully crystallized on the full year because they were done across the year. So, those as we started the year are bearing full fruit. And on top of those, we have new ones that we will continue to roll out this year. That’s why the 9.7 we said below, because we exceed, we expect to beat it.

Just integrating a point because you asked for active portfolio management action, the act, yes, we are envisaging active portfolio management action, i.e. securitization and reduction of EBA negative clients, among others, also in 2023. And the magnitude of the action was such that we can fund it from a capital standpoint, the business dynamic, i.e., the growth of the lending.

Thank you very much.

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

Good morning to everybody. Two questions, the first one is a clarification. I have seen that you are going through something like you were talking in terms of execution of the share buyback, with most of it to start in March and the second part in the second half. I was wondering whether you are going to apply to the ECB for the entire amount and then speed the execution or are you going to replicate that the same process of last year with a double application to the ECB once the first tranche of the buyback is completed? And the second question related to – in general to the asset quality outlook for Italy, I would like to know your views on how the higher rates environment may impact the risk profile and corporates and retail in Italy? My perception is that this argument is a little bit of a downward rates at this level, especially for retail, but I would like to know your view on this. Thank you.

Okay. So, the share buyback, we will apply for the full share buyback in one go. So, not like last year. But we will apply for the full share buyback in one go. We expect to receive the answer from the ECB before the AGM. So at the AGM, if shareholders approve it, we will approve the dividend and the full share buyback. The execution is another thing, because given the magnitude, trying to cram in, at the same time with one bank, the entire amount felt a little bit too ambitious, which is why we are separating it. And then – and that’s not for that. With respect to Italy, I will give you a macro view, but Stefano will add. So, obviously, increased cost of financing in an environment where value chain gets redefined and energy cost, food stuff, commodities cost go up is not great news for our clients, both families and corporates, but they are very liquid. They have been on the front foot on restructuring what we need, but to restructure and at the moment while there is increasing pressure and if you remember, on the third quarter, we even provided the most needy part of our families and corporate with the ability to extend their repayments and their payment of interest to help them, so there is an impact of that, but the impact is limited. Incidentally, very few people took the offer showing that they feel quite strong they can sustain and continue at the level. So for the time being, the macro view is that it is within the realm of what is absorbable.

Yes. If we look – if we look to the stock with a breakdown between retail and corporate to give their flavor, if we look our long book, two-third of this stock of residential is – household sorry is fixed and one-third is floating. That’s different. It’s more or less the other way around for corporate that, however, as some of them has EDGE deposition. So all in all, we are more looking to the impact on one-end available income, on the other end, the overall profitability of corporate deriving from inflation on one end and energy and as a consequence, energy intensive sector that for the time being rates. The situation can be different is the increase of rates is significantly higher that currently assumed.

Thank you. The next question is from Richard Thomas with Bank of America. Please go ahead.

Thank you very much for taking my questions. Just a couple of things. First, could we have a bit more color on your funding plans for 2023 in terms of volumes anticipated? I know there is some reference in the release to capital intense, but I’d be interested in the volumes. And secondly, did I hear properly that the outlook for the payment of cash components in 2023 is that they will be paid in accordance with the terms and conditions? Thank you.

So the overall funding plan that we have for the group is a little bit more than €20 billion. You can break down that in fundamentally free component between €7 billion and $8 billion is the Marella part of the funding plan, around $7 billion is the corporate bond part and then there is the residual portion related to supranational funding and so on. With regards to the first part, it’s more secured also this year as last year towards senior preferred and senior non-preferred, i.e., the subordinated part of the plan it would be fundamentally more related to additional Tier 1. With regards to the cashes, I was already commented before so taking into consideration the current results and the proposed dividend, the coupon there are the condition for payment of the coupon clearly subject to the approval by the AGM of the relevant on one end, results on the other end dividend proposal.

Great. Thank you very much.

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

Hi, thank you. All my questions have been answered. Thanks a lot.

Okay. So this concludes our conference call. Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.