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° ISP will pay a dividend (confirmed) equivalent to an 8.0% yield vs. a 4.0% European banks average and on our estimates ° Italian banks are trading at a PNAV discount to ISP but their profitability is half that of ISP's and their capital is lower e ISP retains the lowest (gross/net) Italian NPE ratio and in 4Q16 NPE were down yoy by 8% gross/10% net. ° Shares have suffered from the uncertainty related to a possible tie-up with insurer Generali - still the seventh worst performing bank in the SX7E YTD Also remain very bullish on market exposed Nordic banks This morning we reiterate our preference for Nordic ee ware here for report) with more market exposed revenues and reiterate our Buy ratings on Danske Bank, Nordea, DNB and SEB ahead of Qi results. We expect to see good fee /trading income in Q1 on the back of strong AUM and continued high activity levels. The relative P/E premium of Nordic banks vs. the sector is now 7% vs. a long term average of 11%. We also note that Nordic banks are expected to continue to deliver close to 4% better ROTE (2017-19E) and have a lower beta. Chart 1: Danske Bank remains best capital return story (Capital buffers as % of market cap) _ 30.0 20.8 20.0 11.0 10.8 10.8 10.4 10.3 10.0 0.0 DANSKE SHBA SEBA NDA DNB SWEDA m Buffer # 17E Div + Buyback (not yetexecuted) § Buffer+ Div + Buyback (not executed) Source: BofA Mernll Lynch Global Research estimates Kind regards, Russell Quelch European Financials Specialist Sales Bank of America Merrill Lynch Global Financials Specialist Sales Team: Russell Quelch - European Banks - London ee Juliette Nichols — European Insurance, Div Fins and Real Estate - i 277 eC‘ Scott Smith - US Financials - New York [aa The power of global connections™ HOUSE_OVERSIGHT_014863