Banca Popolare di Sondrio S p A : 2022-2025 Group’s Business Plan

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PRESS RELEASE

APPROVAL OF THE 2022 - 2025 BUSINESS PLAN

THE BUSINESS PLAN CONFIRMS BANCA POPOLARE DI SONDRIO'S NATURE: AS A "BANK ACTING AS A BANK", DETERMINED TO BE CLOSE TO ITS CUSTOMERS AND TO GROW IN ASSET MANAGEMENT AND IN BANCASSURANCE, WITH A COMMITMENT TO INNOVATE IN THE DIGITAL SPACE. OVER 550 €MM IN DIVIDENDS OVER THE NEXT FOUR YEARS, WITH ANNUAL PAYOUT RATIO AT 50%.

SIGNIFICANT AND SUSTAINABLE VALUE CREATION

• Net profit growing to 323 €MM in 2025
• ROE increasing to 9.2% in 2025

INCREASING SHAREHOLDER DISTRIBUTIONS

• Over 550 €MM in expected dividends over the course of the business plan
• 50% payout ratio every year

SUSTAINED CORE PROFITABILITY

• Core revenues increasing to 1.1 €BN in 2025
• Interest margin growing to 667 €MM in 2025, with a 6% 2021-2025 CAGR
• Net commissions growing to 443 €MM, with a 5.5% 2021-2025 CAGR

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CREDIT AS THE HEART OF BPS'S VALUE PROPOSITION;

A NEW PUSH IN WEALTH MANAGEMENT AND BANCASSURANCE

• Customer loans increasing to 35.9 €BN in 2025
• Assets under management and insurance assets at 13.8 €BN in 2025 with a +12% 2021-2025 CAGR
• Insurance premiums increasing at +11% 2021-2025 CAGR

SOLID CAPITAL BASE AND ROBUST LIQUIDITY POSITION

• 15.6% CET 1 ratio at the end of 2025 and above 15% in each business plan year
• Liquidity Coverage Ratio above 140% in each business plan year
• Net Stable Funding Ratio above 125% in each business plan year

CONTINUOUS DERISKING ACTIVITY

• NPL ratio decreasing to 3.8% in 2025
• Cost of risk at 47 bps in 2025

SIGNIFICANT INVESTMENTS IN IT DEVELOPMENT

• Investments in employees and digitalization, while containing overall costs at 619 €MM in 2025
• Cost/income ratio decreasing to 51.8% in 2025

FOCUS ON ESG

• Integration of ESG factors in credit processes and approval of a responsible credit policy
• Identification of the path to carbon neutrality and portfolio alignment
• Development of ESG products and services

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"I am proud to present our first Business Plan after transforming into a S.p.A. at the end of 2021. Since our foundation in Sondrio in 1871, we have been one of the first cooperative banks in Italy. Our mission is to grow with our customers and our employees, beyond the limits of a traditional Local Bank, with accuracy, availability for our customers, and closeness to our communities, preserving our identity while always changing and innovating", said dott. Mario Alberto Pedranzini, Banca Popolare di

Sondrio's CEO.

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"Over the last ten years, characterized by the well-known contextual complexities, contrary to the market average, our operating margin has largely covered and exceeded our credit losses, and our capitalization is market-leading. We are the Italian Bank with the most organic growth, investing in our people and in our network.

The "Next Step" 2022-2025 Business Plan highlights the prospects of a bank acting as a bank, focussed on our distinctive areas, and committed to growing in key segments including Wealth Management and Bancassurance, where we deem to have further potential for growth, and evolving our relationships with consumers digitally. Our Bank foresees the distribution of over half a billion in dividends, with a 50% payout every year."

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Today, at Palazzo Mezzanotte in Milan, a presentation will be held at 11:00 AM to showcase the Plan's contents.

The event can be streamed via video/audio at the following link: https://channel.royalcast.com/popsoit/#!/popsoit/20220629_1

The supporting documentation will be available before the presentation starts in the

Investor Relations page on the Bank's website: https://istituzionale.popso.it/it/investor-relations/presentazioni-finanziarie

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NEXT STEP

2022 - 2025 strategic guidelines

FOCUS ON DISTINCTIVE AREAS

• Consolidation of customer loans: +16% from 2021 to 2025
• Unique positioning in international operations and services, revenue diversification thanks to BPS Suisse (ca. 9% of the Group's net profit), important contribution of treasury services offered to Institutional Entities (1,800 customers in 2025)
• Stronger synergies between product factories for a 360 degree customer development: Factorit turnover expected at 19.2 €BN in 2025 (+6% 2021-2025 CAGR)
• Quick set up of new operations and development of the ability to intercept new current and prospective demand flows (e.g. tax credits)

QUALIFIED GROWTH IN KEY AREAS

• Wealth management for high potential customers: +12% 2021-2025 CAGR for wealth management/insurance volumes
• Strengthening of the current Bancassurance model, with customer premiums increasing by over 50%
• Reference partner for customers to capitalise on PNRR-related opportunities
• Contribution of payments business to revenue diversification: ca. +10% 2021- 2025 CAGR in transaction volumes

DIGITAL EVOLUTION OF CUSTOMER RELATIONS

• Enhancement of digital service access points, centrality of the «universal» branch strengthened by specialized skills
• Process digitalization and robotization, freeing up time for higher value-added commercial activities
• Growth of the fully digital "Virtual Unit" channel (+36,000 customers)
• Strengthened multi-channel and «phygital» model: Digital Hub for the setup of fully digital sales processes, commercial action and remote assistance, new products and services from the «open» ecosystem
• Upgrade of the tech infrastructure and digital reskilling of employees

TRANSVERSAL ELEMENTS

• Corporate identity and skills strengthening through training and incentives (130,000 annual training hours and improvement of performance management systems, review of compensation policies)

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• Sustainability is at the heart of the Group's operations: Integration of ESG factors into business and operations, through the definition of quantitative targets by the end of 2022 and their monitoring via selected performance indicators selected among international best practices.

BUSINESS PLAN'S MAIN FINANCIAL TARGETS

Income statement results [€MM]	2021	2023 E	2025 E
Interest margin	529	610	667
Net fees and commissions	358	390	443
Result of financial activity	145	88	87
Operating income	1,032	1,088	1,196
Net adjustments to loans and fin. assets	(134)	(171)	(170)
Operating costs	(558)	(592)	(619)
Profit before tax	375	364	450
Net profit	269	263	323

Balance sheet results [€MM]	2021	2023 E	2025 E
Direct funding from customers	39,304	39,693	41,971
Indirect funding from customers	42,891	43,850	48,192
o/w assets under custody	34,186	33,122	34,434
o/w assets under management	6,796	8,457	10,875
o/w insurance deposits	1,909	2,271	2,883
Net loans to customers	31,059	33,027	35,879

Key performance indicators [%]	2021	2023 E	2025 E
ROE	8.9	8.1	9.2
Cost-income ratio	54.1	54.4	51.8
Cost of risk	0.43	0.52	0.47
Gross NPE ratio	5.8	4.3	3.8
NPE Coverage	55.4	48.0	45.8
CET 1 ratio - phased in	15.8	15.9	15.6
Dividend payout	34	50	50

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