Bff Bk Spa

Good afternoon and welcome to the BUSF Banking Group's first quarter 2025 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, press star and two. Please note this event is being recorded. I would like to turn the conference over to Mr. Massimiliano Bellingeri, Group CEO, and Giuseppe Sica, Group CFO. Please go ahead, gentlemen.

Hi, everybody.

Thanks for joining us today for the reporting of first quarter results. There are still more important events happening in Rome. I appreciate that you are here with us listening to our results. We are pleased to report a good start of the year. in any respect, with adjusted net profit of 35 billion, which reminded our target despite the high rescheduling of the taxing portfolio, which is revenue deferred and will be recovered in the following quarters. Taxing has a strong start of the year, with profit before tax up 9% year over year, and long book, which has grown at 5% year over year. is the index in growth, with double-digit growth of 10% plus, and we report the highest level of volumes At the same time, because we didn't collect as much in terms of IPIs what we used in the first quarter, we continued to accumulate our off-dash reserves. We had an increase of over 81 million compared to June when we changed the accrual account. The strength of the business continues also in terms of liquidity. We have 8.5 billion of deposits and a number-to-deposit ratio of 68%. On the important issue of PADU, we continue our work to reduce the stock of PADU, which is down 5% from December. Importantly, we have $190 million which is 15% of the stock of past due in flow period, which is expected then to come off the past due calculation over the next quarter. That's more than double the level that we had before. Containing invoices are now down an additional 25 million compared to the previous quarter and over 100 million reductions since the recesses. As capital, therefore, continues to increase. We have a CC1 ratio of 13.7%, which is above our target significantly. It's above the level we had before we reclassified the portfolio in June of last year. Another important thing to notice, our bond portfolio swung in a positive territory with an improvement of 70 million euro a year, and had to collect and give a sense of the future profitability of the portfolio, and expect to launch all the public gathering activities in Greece at the end of this quarter. If we move to page 4, on the details of the balance sheet, we are highlighting the The long book is 5.8 billion, which is a record high for the first quarter. The bond portfolio continues to shrink following our strategy, and as I mentioned, we have a positive market-market now of 12.5 million, compared to 967 million of last year, given the dynamics on interest rates and the credit spread of Italy. Deposits continue to accrue in transaction services, and therefore we have managed outflows in our online deposits that we manage to, for example, in terms of objectivity, we are fully compliant with the mail requirements and you see the difference in our bonds issued, issued as a leap, but also in the net interest income of the group. The capital generation has been strong, as I mentioned, with 143 bits of capital generated in the last quarter.

In terms of P&L,

Core revenues is just below first quarter of 2024, driven by 12 million of rescheduling, which is the third revenues for the following quarters. We have a reduction in the cost of funding by over 20 million, despite 7 million of costs for the umbrella issues, which is a positive indication also how flexible is our funding structure. and the group CBT in the last year, but we've seen a good growth of the factoring in-landing portfolio, in terms of the landing profitability, despite the lower rates of the rescheduling impact rate. I'll leave the floor to Giuseppe for the presentation, and I'll conclude the presentation.

Thank you, Max. I would now move to slide 6, where we show the key economic trends for the factory and the lending division. A few messages. First, gross interest income is down year-on-year. However, this is mainly due to higher scheduling, which are expected to be recovered throughout the year. And this is despite lower interest rates. Second, the income is stable year-on-year, and importantly includes 3.8 million of recovery rights, Third, and importantly, gross yield on average loans has decreased less than the SPI reference rate, with MRO rate down 1.45% versus the cost yield down 98%. Obviously, cost of funding is down as well. Moving to the bottom part of the slide, total SPI and recovery funds are up 124 million, or 11% year-on-year, and off-bank sheet funds, which are part of our deferred profitability, are up 81 million since June 24, i.e. post-step-up of the accrual rate. Moving now to slide 7, on factoring lending loan book and volumes. The group loan book is up 5% year-on-year, and importantly, is that we are moving up 10% year-on-year, reflecting higher volumes, on which I will comment in a moment. Staying down, this reflects the payment due to cash injection by the government at the end of 2024. And finally, on the long book, let me highlight France, which is starting to be material for the group with significant potential for further growth. Moving to volumes. These are at 4% year-on-year and represent the highest first quarter ever for BFFs. Italy is at 10% year-on-year, including the trend already observed in the fourth quarter of last year. And Poland is also significant here. I will now move to slide 8 on payments. The number of transactions continues to show positive trends, It is up 4% year-on-year, with an increasing component of instant payments. Debenhits are slightly down year-on-year due to some flat fee mechanisms, while the qualities are down mainly on lower-checked statements. Important for us, moving to security derivatives on slide 9, a few relevant points. Assets under deposit have now reached 75 billion and are up 21% year-on-year. And it is rich thanks to commercial initiatives. Second, global assets under custody are close to 130 billion and are up 9% year-on-year. Deposited strengths are actually reflected in revenues which are up 15% year-on-year. Importantly, for our business model and for our growth, we have also recorded strong deposit growth to 3.8 billion of 28% year-on-year. Again, this reflects commercial initiatives and prime asset allocations. We would like to spend on our cost space. Cost discipline is confirmed with all types in DNA up only by 4%, mainly due to the lighting fleet in DNA, and ongoing investments in the business. Looking at the various divisions, factory and lending offers in the area are up 2% year-on-year. Payments, 3% year-on-year, mainly related to ITT costs and investments for growth. Security services and corporate standards, where most of our investments are concentrated, are up 6% year-on-year. Any variable remuneration is to be assigned only after the removal of Bank of Italy funds. Slide 11 on our balance sheet. We confirm that funding remains ample, with the launch repo iteration 68%, and importantly for the future, there has been an increase of $70 million of our mark-to-market on the F2Collect portfolio. Going a bit more in detail, funding costs are below average preference rates, which are a blend of a rider and driver. Since first quarter 24, we have issued 600 million of MRLE digital securities and discovered all our MRLEs. We have no ECD funding to be refinanced. As much said, our ETC portfolio continues to go down in line with plans. And SFR and LCR are both up since December, with LCR up 25 percentage points, despite the growth of the long-haul. Slide 12 confirms the low-risk profile of the company. The slide is full of numbers, so let me follow the three messages on the slide. A, NPV is down to $1.8 billion. This is driven by an ongoing reduction of the total revenue. B, 95% of our MPH corner is represented by public administrations, with MPHs represented almost exclusively by municipalities in conservatorships. And following the communication already done in January 25 on one specific case, we are underway further appeals to the European Court for Human Rights to obtain central obligations, central government obligations to pay. at 4.2 BTC. Let's take in just a bit more of detail on past view. Competing invoices have down another 25 million in the quarter. There has been a 25% reduction in the past view, given by collections, proving by the way the rotation of our portfolio. New debtors from BORIS in past view is only 7 million in the quarter with 7 to 4 million of exposure to vector in past view going back to bonus so the new class view is really driven by content only or exporting to fields more than levels is useful um i will now move to slide 14 On capital generation, our CBC1 is above 3.3% at 13.7%. This is despite a 50% increase in FWA and 65% FWA length. Capital generation in the quarter is 143 basis points, and total capital is also up similarly to 16.7%. As I mentioned before, all MRL requirements affected from January 25, of course, the LAMPOL FAFSA. Finally, in the topic of questions anyway, the dividend policy is confirmed, subject to the listing of the dividend band by band collider. Let me now invite the floor to our group CEO for his final consideration.

Thank you, Professor, for the very clear presentation. We leave a few takeaways for this presentation on page 15. We are off to a good start this year, now with our expectations. Good momentum in the fractional and lending business. The double-day growth in Italy and with an increase in embedded profitability of the off-balance sheet fund. We continue a steady way dance in total buzz view and in competitive invoices. And the new buzz view are almost entirely grievous. but a continuing effect with a significant increase of the part of the portfolio which is in full period, which in terms of output is very positive for the continual reduction of the PADDU and increase the efficiency of our other UAE density. This translates into a good core capital generation. with a CP1 that should not be restored to the levels that we had before the classification of last year, starting at four positions as well for the future. Thank you again for joining us today, and we welcome your questions, which we will answer now.

Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone telephone. If you're using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, press bar and 2. The first question comes from Samadhu Niyadu of Ketusha Earth.

Hello and good afternoon. Thank you for taking my questions. I have a couple of questions. I heard one is on volumes. there were good numbers obviously we were also comparing with easy comps but I wanted to focus on France where do you think we could see the region in the next few years and yeah if you can give us some color from that and then the second question is on the cure period amount looking at the amount that is much higher than in the last quarters theoretically I understand that it was more as you are going to collect your contingent portfolio, the more HACIU should be reduced, but is there something more behind that and can you give us more color on that as well?

Thank you. Thank you. Thank you for the question. But look, on volumes, yes, we're up to a good start.

France is providing support in the crop. It's a very small market for us at the moment, but it's easy. county has a very high expenditure in goods and services with a portion of the expenditure which is paid late. Importantly, a lot of our customers already work there. Now, we have these results without even a physical presence in the country. And we are delivering at the level we were expecting with a branch open there. So we think actually Compared to our expectations, the market can actually deliver quite a bit, particularly once we have the ability to open the branch back. In terms of the past due, you correctly pointed out two key things which also you guys highlighted before. First one is the past due period of 190 million. national substantial increases compared to the ones we had in the previous quarter, which will then translate into a lower level of PPU going forward. The second aspect I would like to highlight is, on page 13, the second to last part, 11 million of new past views generated in this work. That's not a quantitative invoice, that's a total past view of new directives generated in this work, which actually indicates, confirms, what is said over to the market, which actually structurally, our business model is unchanged on the front book. We're actually dealing which is getting scourged steadily and should restore a level of underground density which is more in line with the real risk profile of this business.

Thank you. The next question is from Manuela Meroni of Intesa San Paolo.

Good evening, thank you for taking my questions. The first one is on the rescheduling in collection. I'm wondering if you can share with us what are the reasons that these high rescheduling in collection that we read in this quarter and if the starting point for the second quarter would be the level of NII plus these 12 million that was the rescheduling impact in the quarter. The second question is, again, on the past due trend. I think that it was a very good sign that your past due declined, and this is just 11 million euros of new past due from debt or from bonus to past due. I'm wondering if you can expect such a trend to continue also in the next quarter. And the last question is on the dividend ban. I'm wondering if you have some information about that. the potential removal of the BAN.

Thank you. Continuing BAN with no removal, continue with a very good line of communication with Bank of Italy, or communicate to the market as soon as we have.

I think the good thing is actually to restore capital positions, which is a good battle of capital, which I think is quite reassuring, and also the other big things, the last quarter. In terms of past due time, we continue to operate to reduce the past due. We indicated that a lot of the activities that were put in place in the last year saved a bit of time to play out, and so we expect an acceleration proportionally of the release of the past due over time. Also, simply for a mathematical reason, which is highlighted actually on page 13. Because it is only 1% to have the opposite impact view, actually the reduction of the contagion involved is a disproportionate effect when those get reduced towards the end of that 1%. All this time it's not going to be a linear trajectory and that's why we expect things to improve even better in the following course. We have a minimum amount of work on that aspect. The return on collection, remember we don't control when the debtors pay us, basically there's a fee, but depending on the choice they make in terms of paying certain invoices or not, is invoiced as a risk. our expected collection date, then we set a new collection date to keep the IRR of the portfolio constant, and so you can't necessarily add that amount of rescheduling to the next quarter, and this is my to collect, but it's an amount that gets recovered and in a sense, keeps the profitability of the business at a pretty good level. Actually, we even highlighted, so we did highlight, but I think this is an important point, in terms of credit. We have improved the use of the portfolio and so it provides a support for the target.

Thank you.

The next question is from Andrea Levy of Equica.

Thank you for taking my questions and good afternoon. The first one is related to the 8076 guidance you provided in February. If you confirm it, you can confirm it or provide an update on that. And if you can provide some more color on the trajectory for this year. And in particular, I want to ask you on volume growth and long growth that are showing the signs of recovery. but in some way are still below which was the original target in the plan that was Agro if I remember well above 10% so just to understand when do you expect in the current market environment to come back to that level and or if this level is still a reasonable trigger that we can imagine over the next few quarters or next few years.

Thank you. In terms of guidance, frankly, we made a pretty clear statement.

The performance is, I mean, what we expected. And, of course, the guidance we have was given. So, we have no more to say. We think that was a good start, and we continue to deliver against the usual targets. In terms of volumes and long-laws, I mean, I think The portfolio shows that quickly. You need to look at the long term trend and not the point in time. It may not be necessarily the best representation. For us, what is important is the interesting, the strong growth in volumes across many geographies and a good pipeline. We have rejuvenated, reenergized the space team. We think there are plenty of opportunities. Remember, it's also the team. that has changed leadership around that in the middle of the quarter. So we think actually, because we're looking at, in a sense, the past, something which is already for six weeks old, if you want, in terms of numbers, we expect to see positive results for all sorts of organizational changes and the upgrade of the team, the same.

The next question is from Simonetta Curiosi of MediBanca.

Hello, good evening. A couple of questions from my side. The first is on the trending volumes. That was very strong in Italy, especially the NHS segment. So the question is, if there is, as I suppose, an impact of the large contracts that you have announced last year, it's possible to give a color of how much comes from that large contract, and on the contrary, the PA segment is not so brilliant, so if you could comment what is happening there, and and also in Spain. And the second question on the scheduling impact, which was negative above last year. You didn't provide this data previously. So if you could help us to understand this dynamic.

Thank you.

Yes, on public administration in Italy, I think it's driven mostly by lower volumes that we've seen around the U.C. decision. In Spain, the volumes have been driven, have been driven mostly by a contract that we have lost to the contract, which has a very low marginality. with a relatively limited amount of API interest and therefore profitability for us was not very significant. So in terms of profitability Spain is actually above budget for us. In terms of the rescheduling If we have given the details of the results given, changing the core rate, that number, the linear impact on the net over the course, better to provide it split, is simply as I mentioned before the question of of Andrea, who says that we haven't collected some ordering models, which we expected to collect in this quarter, and it didn't happen. For us, we take a very prudent approach to accounting, so we take the same internal rate of return, assume a new collection date, and take a provision on the revenue level, which keeps the IRR constant.

In the Italian infrastructure environment, it means that you are deferring to a more than proportional stability. Thank you.

As a reminder, if you have a question, please press star then 1 on your telephone. The next question comes from Giovanni Lazzoli of Deutsche Bank.

Good afternoon. Two very quick questions. The first one is you can share with us how much of the decrease in risk-weighted assets is related to lower operational risks, because it's mentioned in the press release. And the second question, again, on rescheduling the 12 million euros. So there has been a postponement in the entertainment schedule. I was wondering what was driving this. Is this, you know, normally in your opinion? And what makes you confident that you can recover this in 2025 in the next couple of quarters? Thank you.

Yes, in terms of the recovery, the next step of course is to create a mechanism of a court.

We are keeping the support rate and the contracts as usual for the key health. We expect to collect those receivables in the following quarters.

Your voice is very noisy. Can you speak louder?

Sorry, we were reshuffling some paper in front of the... So, thanks for letting me know. So, what I said in terms of rescheduling, that amount is then spread out over the expected collection time of the invoice, which is usually a few months later, so that gets in the following quarter. and therefore the actual collection time. If, for instance, we collect earlier than our expected collection time, then that amount actually goes to the PML immediately. So that's how the mechanism works. In terms of the INCRECT on RWA, you deserve to answer.

It's around 40 bits, the reduction of... but the increase of common activity of 1G2 operationally decreases, and it's expected to remain constant over the next two quarters.

This is also important in terms of operational risk, because, remember, the way the mechanism works is very much linked to reported transitability, and after 2035 we will lose, in a sense, 2022, where we had a one-off effect of the equal of the 40 euros. And so, even going forward, as Giuseppe mentioned, besides this year, we should actually have these benefits persisting over time, even with increased profitability.

For any further questions, please press star, then 1 on your touchscreen telephone. This concludes our question and answer session. I would like to turn the conference back over to Mr. Belangeri and Mr. Sica for any closing remarks.

Thank you. Thank you for joining us tonight and for the questions.

And we welcome the opportunity to talk to you in the future. Thank you very much.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.