Mediobanca (MB) Investor Update summary

Strategic and Financial Assessment

• The proposed all-share offer from MPS is considered financially inadequate, with the exchange ratio (2.533x) representing a 32% discount to the board's average valuation (3.71x), and offering no premium to Mediobanca's share price.

• The combination would create a mid-sized, undifferentiated commercial bank with diluted brand reputation, low growth potential, and a shift toward lower-multiple retail/SME banking.

• MB shareholders would face over 10% recurring earnings and DPS dilution, bearing more than 60% of the combined entity's risks and dis-synergies.

• The offer structure introduces complex governance, with a pyramid structure and significant minority shareholder influence, raising execution and integration risks.

• Consideration is entirely in MPS shares, increasing risk exposure for MB shareholders.

Financial and Operational Impact

• MPS has a history of over €25bn in capital increases, market share erosion, and a diluted business model, with recent performance driven by non-recurring items like high interest rates and tax benefits.

• Asset quality at MPS is weaker than peers, with higher NPE ratios, probability of default, lower RWA density, and significant legal risks (petitum ~35% of CET1).

• Limited earnings visibility and declining profitability at MPS, with consensus expecting ROTE below 10%.

• The merger would result in a negative PBT impact of EUR 460 million, potentially rising to EUR 675 million if the merger is not completed.

• Synergies are expected to be negative, with revenue and talent attrition in wealth management and CIB, and additional integration costs.

Standalone Strategy and Shareholder Returns

• Mediobanca's standalone plan targets 6% annual revenue growth and 9% EPS growth through 2028, with revenues expected to reach €4.4bn by FY28.

• Shareholder remuneration is set to reach €5bn in cash distributions over three years, with a 100% payout ratio, doubling of cash dividends by 2028, and a cumulative yield of over 30%.

• The Banca Generali transaction is highlighted as a superior value-creating alternative, accelerating growth in wealth management.

• Mediobanca's business model is differentiated, resilient across interest rate cycles, and focused on capital-light, value-added services.

• Industry-leading capital generation and cash payout position MB among the top EU banks for dividend yield and capital strength.