Fondazione Magna Grecia incontra Camillo Greco Responsabile Amministrazione, Finanza e Controllo

Thank you to the president for the invitation. I also bring greetings from Sor Delfante, who is engaged in an institutional commitment. I thank the entire board of directors for this opportunity to present Poste. I will give a brief presentation on Poste's activities and then open the floor for questions, also relevant to what I have discussed regarding the presence of Poste in the South in particular. So, Poste is a company controlled by the state: 65% of Poste is owned by the Italian Republic, 29% through the Ministry of Economy and Finance and 35% through Cassa Depositi e Prestiti. It is a company listed on the stock exchange since 2015, so nine years, and the market capitalization is about 16 billion euros. As consumers, I imagine, since we have 45 million customers in Italy out of 60 million inhabitants, you know Poste, its strengths and weaknesses. We have 13,000 post offices throughout Italy; every municipality has a post office, many municipalities have more than one. But we have a platform that goes beyond post offices, as we have digital applications, a third-party network of tobacconists, gas stations, and other 50,000 points of sale, plus 60,000 points. I said we have 45 million customers and 35 million financial customers. I recall that Poste does four things: logistics (parcels and mail), financial services through Banco Posta, insurance services through Poste Vita, and payments with PostePay. We have 29 million cards with PostePay, prepaid cards; I imagine many of you have more than one. We have 65% market share in that activity. A very complicated slide, I won't talk about it, but just to say that Poste Italiane is like a chair that stands on three legs: payments make money, financial services make money, insurance makes money, and logistics makes money. The reason it doesn't make money is that in Italy people no longer send letters. So we have a system that is calibrated to send a letter from Filicudi, since we are here at the Magna Grecia Foundation, to Gorizia at the same cost as a letter from Milan to Rome or vice versa, with quality characteristics in terms of delivery time that are only sustainable in a context where volumes are much higher. To overcome this secular dynamic, what we have done is start selling parcels. So many of you, I imagine, receive parcels through the Poste network. We are the largest operator in Italy after Amazon Logistics in parcel delivery; we have about 30% market share. In the South, or Magna Grecia, we are particularly present, certainly more than the entire banking system on an accumulated basis in southern Italy. So what we show on the right is that we have more than 4,000 post offices, 20,000 employees, 3,000 cash dispensers in many small centers. We are the only form of cash distribution. Otherwise, since the banking system has gradually closed branches around the country, we have remained the last bastion for having liquidity. So 24 hours a day we have financial advisors. That is the financial part. And the last point: we manage more than 200 billion euros of Italians' savings. Specifically, we have more than 200 billion in financial assets and 140 billion in postal savings. In southern Italy, I recall that postal savings, for those who don't know, go directly to the state budget, so they serve to finance. So that is the financial activity. As for logistics activity, we have more than a thousand distribution centers, 8,000 postmen who are gradually becoming parcel carriers, linking back to what I was saying earlier. We have more than 2,000 electric vehicles. We have an excellence that is continuously improving. Specifically, I would like to remind you that we opened in Naples the first micro-fulfillment center, which is a center we opened for Amazon where we will be able to handle e-commerce orders with same-day delivery. This is because, using artificial intelligence, what we do with Amazon is anticipate demand, anticipate what will be bought, and ensure that these peripheral depots are stocked with what will be requested. So, having the goods already at our depots, we will be able to deliver them in shorter times than normal. So this is the first center, already operational in Naples, and others will follow, also in the South. I already said it before: Poste is also a digital company. But there is a point worth highlighting: SPID. What you can see is that in 2017 we had less than 2 million digital identities; they have grown to 27 million. You all use the system to access the tax agency, pay bills. SPID has become a vehicle for accessing central administration and also third-party services, such as utilities. So given this context, we have just presented Poste's industrial plan. What have we proposed to our stakeholders to make Poste sustainable given the issues I have discussed, particularly regarding mail? First, we are gradually transforming the postal network into a network that delivers parcels. As many of you know, mail delivery happens in the morning, while parcels are delivered throughout the day. Naturally, if someone buys something online, they need and want the parcel to arrive as soon as possible. So what we are doing is converting the network of postmen into parcel carriers, so that parcels can be delivered in the evening and on weekends, things that are not yet done. So we are working on that. We are working on the evolution of the commercial network to ensure that even in centers where financial institutions are leaving, there is an offer that meets the needs of our customers, most of whom are already operators of a product, so to sell more. This will allow us to continue investing in the network and ensure that Poste's resources keep up with the times. Consider that just last year we spent more than 900 million euros between operating costs and long-term investments to renew the network. So the need to generate liquidity is well present. I have already told this a bit. However, in 2017 we had a 90% market share in mail, the sixth operator in Italy in parcels. Bartolini, DHL, FedEx, UPS were all ahead of us. We continued to invest. Now we are the first operator in Italy after Amazon Logistics in the B2C sector, our strong point: home delivery. For the future, we want to continue to be number one in this sector. Another thing we are investing heavily in is becoming very present in cross-border traffic entering or leaving Italy. Specifically, many of Poste's customers buy on websites where products are managed in China, and we are number one in Italy for cross-border activity with China. We have more than 300,000 parcels every day of the week arriving in Italy from China that we handle, with a 60% market share. This is probably the thing that Dr. Delfante and Dr. Lasco are most proud of: the Polis project. In Italy we have 12,800 post offices; 7,000 are in municipalities with fewer than 15,000 inhabitants. These municipalities are subject to population impoverishment because many people move from smaller to larger centers. These locations become less desirable as places to reside. The post office is trying to make this trend less evident by making the post office a hub of the public administration. This means that in 7,000 post offices out of 12,800, specifically the 7,000 in municipalities with fewer than 15,000 inhabitants, you will be able to go to the post office for passports, identity cards, civil status certificates, certificates ranging from driver's licenses to 30 different certificates. By doing so, we make those locations more attractive. The second thing we do is reduce CO2 consumption. There are illustrious senior managers of the public administration here. To get a passport in many countries, you have to go from a smaller center to a larger center, which requires time, fuel consumption, and time consumption. By doing this, we avoid these things and thus reduce CO2 consumption. Another thing we will do is have more than 250 coworking sites. Many of you know post offices: typically in smaller centers, the post office is on the ground floor, and above there are offices that are typically unused. What we will do is transform these first and second floors into coworking centers where a small entrepreneur or a young person who wants to create a startup can go, have access to WiFi, access to a whole series of services that are typically accessible in larger centers. By doing so, we hope to retain the population in their original centers. And this, excuse me, to conclude, is an enormous investment in terms of Poste's firepower: the total investment is 1.3 billion euros, of which 800 million euros were given to us as grants from the PNRR because it was one of the most appreciated projects. We have many post offices from foreign countries coming to Italy to compare with us to see if they can replicate the same thing abroad. So 800 million euros from the PNRR and 500 million euros from Poste. So beyond the fact that we are providing a service, the unspoken but obvious to all is that by making these locations more attractive to the general public, we hope to also activate additional clientele. Because if a person comes to the post office to get a passport or identity card, they might need, for example, a new phone line or to make a small investment. Since they are already at the post office, they might work with us. So there is also a spin-off for Poste. For those who don't know, this is the company's income statement: we have revenues of about 12 billion euros, a billion a month, and we have about 200 million euros a month in operating profit. So the group's annual operating profit is about 2.5 billion, revenues are 12 billion euros. We have had a dividend operation that is growing strongly. And beyond comments on whether it was interesting or not, what I am pleased to say is that of the 35% of Poste's shareholding that is not the Italian Republic, 35% is listed on the stock exchange, and 13% of that 35%, about 12%, is held by individual Italian investors. We have 150,000 of them, and of these 150,000, I imagine many are in the South. The stock is seen as a proxy for the country. So we have a yield of about 7% today, and many Italians invest in Poste because over the years it has become a symbol of security. In all moments when the economic context has deteriorated, for example during the pandemic, what happened is that we gained new customers who moved from various smaller institutions to Poste because, with the state guarantee, it is seen as a safer place to park savings. Thank you.

Thank you, you give me the opportunity to address a topic I haven't yet addressed. So, what is Poste from a competitive position point of view? Poste's main asset is the capillarity of the network. We reach everywhere. We have 45 million customers. So Poste's objective cannot be to have additional customers beyond those 45 million, because the customers represent Italy. So the group's strategy is to try to sell more to those same customers, since the customer base is not expandable. What do we try to sell? We try to sell products that are relevant every day. So we are talking about logistics, mail, financial services. But financial services, this is also a mantra of the group: financial services that allow preserving capital and giving a small return, but not speculative investments, nor with a large exposure to the rational risk, because if a Poste customer, typically an average Italian, invests his savings with us and loses them, it is a tragedy for him and for our reputation in the market. So more than 95% of total products, sorry, more than 95% of the financial assets we have are in capital-guaranteed products. If you buy postal savings or a first-branch insurance policy from Poste Vita, they are capital-guaranteed. So the idea is that Poste protects the investment. So we have logistics, everyday needs; we have investments in the financial sector with controlled risk; and the same goes for what we do in the insurance sector. In the payments sector, what we seek are also everyday needs. The cards I mentioned, I imagine many of you hold, are prepaid cards where you put money in before using the card, and they are widely used for online purchases. Anyone who buys online in Italy, rightly, has a fear of linking an online purchase to their main current account, always afraid of having the card cloned or losing more money. So these cards are used to transfer amounts sufficient for the purchase, so that the remaining part goes to zero. So the risk of cloning is much less material. So the idea, to answer the doctor's question, is to continue in this furrow, continue to sell products that are everyday needs, relevant to the vast majority of the Italian population. In this context, the topic of telecommunications also clearly fits: we have 5% market share in Italy in mobile telephony and fiber, and also the recent entry into the energy sector.

What I can tell you in general terms is that we have a task force that works 24 hours a day on these issues. Our strength and weakness is that if there is an attack on Poste Italiane, within an hour it is on the front page of Corriere della Sera. So reaction times are very fast. We spend hundreds of millions of euros on this type of activity. We also have partnerships to have all our backup from a technical point of view. All our data is also with cloud activities; we work with both Microsoft and Amazon, who help us. At the first incursion, we react with a black-belt team in very rapid times. This is one of the hottest topics on the agenda of the group. And if you want to come to the Europa Service Center in Prattico, you will see that we have hundreds of people working only on this, 7 days a week.

I have been working at Poste for 4 years now, since July 2020, and I must say that I found absolutely excellent skills within the group. So much so that my entire first line, the budget, planning and control, investor relations, tax, finance, administration, I didn't change anyone because the team was already of a very high level. When you look at the Italian market, Poste is a very, very sought-after point of arrival. And I remember that one of the first weekends I was at Poste, we were working on the previous industrial plan. I was used to working from Monday morning to Sunday evening, 24 hours a day. I remember proposing a conference call to prepare for a meeting we had the next morning on Sunday afternoon, expecting to be alone on the phone, maybe with one colleague. Instead, the whole team was present. This is because the work ethic is excellent. And I will also say that what is even more proof of what I am saying is that we also have many colleagues who live in Milan and commute to Rome, while typically the trend is the opposite: one lives in Rome and goes to work in Milan. We have many colleagues who do the opposite.

Yes, this is related to what I was saying earlier. Poste in recent years, with exceptions that can be counted on two hands, has never closed a post office. So to keep post offices open and avoid the mayor, the carabinieri, all protesting, the only possibility is to sell more. You have to sell more, and it is working. So the Polis project fits into this context. We have gone from about 140,000 employees in 2017 to 120,000 employees, so 20,000 fewer employees without a day of strike and without any layoffs, only through accompaniment to early retirement for those who decided to leave. This is the group's policy for the future as well. After this step we had, the current industrial plan that goes up to 2028 provides for a reduction of about 5,000 employees against 20,000 hires and 25,000 exits. So we have now reached a fairly physiological level, not closing further post offices, which is not in the program. So what we are doing to better center the response is trying to convert personnel. Going back to the point I made earlier, it is clear that if we lose, as we know, half a billion euros in revenue in mail because in Italy people no longer send letters, or there is what is called substitution, it is clear that if we have 35,000 postmen, these people must legitimately understand that they have to deliver parcels, which have slightly different dynamics than mail. So we are trying to convert personnel for logistics activity. As for all the counter activity, what we are trying to do, you may have seen, is that we have 12,800 post offices, but there are many parts of the country where post offices are open two or three days a week, seven days a week. So we are trying to transfer personnel from one office to another, from municipality A to municipality B, to create more flexibility.

We have a plan that has outlined a trajectory up to 2028. So if the question is with reference to the end of the mandate of Dr. Del Fante? No, no, I was referring to the end of the PNRR. Well, we believe that this is actually linked to what I said earlier. This great investment of 1.3 billion, 800 million from the PNRR plus 500 million from Poste, is instrumental in making the post offices in these 7,000 municipalities even more efficient. A small aside, but you may have read in the newspapers: the project was so well-liked that, having started with 7,000 post offices in municipalities under 15,000 inhabitants, the government asked us to extend the possibility of delivering passports to all 12,800 post offices. So this is a project that perhaps has a broader scope than we initially planned. However, what we have planned in terms of company investments, personnel conversion, and sales force efficiency should allow us to get past 2026 with increases in profitability up to 2028.

I can say, coming from abroad, I find that relationship absolutely excellent, extremely professional. Our shareholder is rational in the dividend and in the decisions it makes. So we have had an excellent relationship, nothing to say in that regard. Naturally, the relationship is slightly different between the Ministry of Economy and Finance and CDP, because the MEF controls 29% of Poste Italiane's capital as a pure shareholder, while with CDP there is also a commercial relationship because we distribute postal savings, which is a service of general economic interest. By law, CDP must issue postal savings, and by law we must distribute it. So with CDP there is a commercial relationship between a service provider and a client, so there are agreements regulated on a three-year basis, but the relationship is absolutely excellent. There is only this difference from the point of view of shareholder needs.

Dr. Del Fante is always very proud to say that Poste Italiane is one of McKinsey's favorite case studies when they go around the world, telling how the postal service has evolved in G7 countries. But also very recently, we had a delegation from a postal service provider in the Netherlands, so there are at least two, I won't say which, that came to us for two days of sessions on what can be done. And very recently, we also had a delegation from a North African country that also came to try to understand why many of these heritages are not yet being used to the best. As you rightly recalled, Doctor, Poste Italiane was founded in 1862, so we have 160 years of history, and we have somehow already absorbed and metabolized some of the trends. Another thing I didn't say but might be interesting for this audience is that in Italy, 35 letters per inhabitant are sent annually, so about three per month. The European average is 100, Great Britain is 110. So we have somehow already absorbed the blow of the reduction in mail compared to other countries, and we had to change before others. So many are interested in understanding exactly how we did it.

Well, the challenges are not short-term, there is none so evident. What are certainly the challenges? There are two: one industrial and one financial. The industrial challenge is to complete the conversion from a system centered on mail to a system centered on logistics. This is by far the main challenge of the group. The second thing, from a financial point of view, is to try to segment the clientele better, not for our interest but also for the interest of our clientele. Because there are families or small savers who have 20,000 euros set aside that are not employed in activities that yield something to these people. So the idea of segmenting the clientele, also helping to make the capital of our clients work more in a satisfactory way for them.