BFF Bank S.p.A.

Good afternoon and welcome to the BFF Banking Group first quarter 2026 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 the opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would like to turn the conference over to Caterina Della Mora, Head of Investor Relations, and Giuseppe Sica, Group CEO. Please go ahead. Good afternoon, and thank you for joining BFF's first quarter 2026 financial results call. We will start with a presentation by our CEO, Giuseppe Sica, followed by Q&A. To ensure that we can take everyone's questions, we kindly ask you to link yourself to three questions. Let me hand over now to Giuseppe Sicca.

Thank you, Caterina, and thank you everyone for joining this call. Before we dive into the presentation, some of you may have already noticed that we have introduced some new formats and slides. This allows us to better illustrate the diversified nature of our group and to focus on the key drivers of our performance. You can still find for this quarter all the other details in the appendix. Today we are announcing what are good results in what remains a complex environment. Our profitability improved with adjusted net income significantly up year on year. This result is underpinned by the performance of our payments and security services business, as well as factoring and lending, where we are focused on the profitability of our volumes. As a result, we now meet CET1 and also our total capital ratio requirements. This is a significant, although expected, change compared to what we have announced at our full year results. We continue to review options for our business model, given the recent changes in portfolio classification and the need to address calendar provisioning. We are focusing on maximizing value for all stakeholders. These actions will form part of our new strategic plan, which we will unveil in the second part of the year. Before going into numbers, Let me remind you that while our full-year results reflect the regulatory measure received by the Bank of Italy at the end of March, the Bank of Italy inspection is still ongoing. Let us now look at our key financial metrics on slide 3. ROE stayed well above 20%, with all divisions contributing strongly to these results. The income of 43 million is up 24% year-on-year, the unadjusted net income is higher at around 50 million. Let me remind you of our net income target for 2026 of 115 to 140 million that we published on the 30th of April. Our net profit in Q1 has been achieved thanks to a revenue increase of around 20%. As I said, our focus remains on profitability. Factoring and lending loans are down year on year, but as you will see, profitability is up. Transaction services deposit is only slightly down, mainly due to one client, which remains with us, but has adjusted its liquidity needs. Our extremely strong loan-to-deposit ratio has remained stable at 76%, and repos are down. Finally, Our CET1 is at 1.1% compared to full year numbers. Moving to the next slide. I won't spend much time on this one, but let me stress that we have achieved this 24% increase in net profit in a rather complex order. Importantly, we have achieved this mainly through an increase in revenues. Costs are up as we continue to invest as are provisions. and we have taken a more conservative approach. On slide 5, as you can see, all business divisions contribute to profitability, with payments and security services generating 14 million in PBT, up 25% year-on-year. As I have previously mentioned, the earnings potential for these two divisions would be materially higher if we invested liquidity in Italian government bonds. In this case, these two divisions would have achieved 31 million euros in PVT in the first quarter. Again, let me remind you that we are the leader in both payments and security services in Italy, in the niches where we operate. These activities have virtually zero RWA absorption. In payments, we intermediate more than 130 banks and payment institutions. In security services, and specifically in the pension funds niche, we have an estimated market share of about 50%. Factoring PBT is up on improved margins. And the PBT for the corporate center rose to 10.7 million, thanks to lower rates in our HTC portfolio. Moving now to slide 13. I have already mentioned our diversified sources of profit. And on this slide, you can see that DSS is also diversified in terms of net revenues. More than 60% of the net revenues in the first quarter were generated by activities outside of core factoring. And again, the contribution from payments and security services would have been 16.5 million higher if liquidity had been invested in Italian government bonds. Slide 7 is also a key slide. Our net interest income is diversified. The HTC portfolio contribution is going up and will go up materially as our fixed rate portfolio at 0.6% yield will expire. Importantly, the net spread of our factoring and lending has gone up from 3.6% to 4.2%. As we have been very disciplined on the price at which we buy invoices, we have reduced the scheduling and reduced the cost of funding. You will find usual details in the appendix. Let's move to slide 8 to look at the net fee and commission income. This is another point that positively demonstrates BFF's diversified business model and the growth across our business divisions. In security services, this was driven by strong commercial activity in the first quarter. In payments, we want new clients and are looking at a healthy pipeline. Finally, in factoring and lending, we have seen growth in the servicing of third-party portfolios. Looking at costs on slide nine, we continue to focus on cost discipline with investments in the businesses focused on our transformation. This includes higher HR costs as we hire talent to support change. In payments, rising expenses reflect higher volumes. Taking this into account, we still maintain our cost income ratio at 42%, significantly down year-on-year. Slide 10 is focused on our commercial performance, which is reflective of our actions. Security services deposits have grown compared to year-ends. This also confirms our strong liquidity position, which I will show in more detail shortly. Payments. The reduction in deposits is largely driven by a single counterparty that remains a client, as I mentioned in introduction. We have also onboarded a new client and will continue to do so in the second quarter. In factoring and lending, I already mentioned that we are focusing on the quality of volumes and improving collections. This combination led to a small reduction in loans, which will continue over the next few quarters. as we communicated on the 30th of April. Moving now to slide 11. Unrealized gains on our variable rate portfolio are at around 60 million, which corresponds to around one percentage point of common equity, tier one, and is not included in our capital projections. On the other hand, we still have a 2.5% negative headwinds on the 1 billion fixed rate portfolio. We expect, therefore, an around 25 million increase in PBT as these mature. Moving to our customer loan portfolio on slide 12. Our activities are diversified, both in terms of type and geography. factoring accounts for around half the total loan book and is spread across six countries in Europe. I would like to highlight that we see further room for diversification with growth potential in activities outside of PA factoring, always in areas with low credit risk. Looking at our impaired loans ratio on slide one, Let me make a few comments. We have a net impaired loans of 73% with 96% of the impaired loans represented by the public administration and therefore with limited credit risk. Post-TRA actions, our coverage of non-performing loans has increased to 80%. Importantly, we have reduced the portfolio of Italian negative quote rulings by 14% in effectively two months, including using the option of prepossessions. Slide 14 shows the quality of our origination and collections. Let me highlight the quality of what we buy. We have collected 91% Of all invoices, we acquired in 2025. The outstandings are largely from the fourth quarter, in line with our around 180 days DSO. This slide is important because it shows how we can manage capital. For instance, in first quarter, we have collected around $1 billion. of past due exposure, or 1.5 billion RWA reduction, corresponding to a common equity tier one generation of almost three percentage points. Slide 15 shows how disciplined we have been in managing liquidity. Cost of funding, including the cost of bonds, is down as it is spread versus hyper. Excluding bonds, we would be finding ourselves below IBOR. Repos are down. Both LCR and SFR have improved. Our RWA absorption is very high, and this is a key driver of the strategic review currently underway. Nonetheless, on slide 16, Thanks to capital generation in the first quarter, both CET1 and TCR at 11% and 13.4% respectively are above SREP. These figures are presented including the net profit for the first quarter, which will be formally added following the approval of the annual report at the AGM on the 16th of June. Organic capital generation for the quarter was around 130 points or around 60 million euros. Now on the key takeaways. A quick summary of the set of results before we move to the Q&A. Our first quarter results show that BFF is a diversified business with all divisions contributing to profitability. We maintain our net income target for 2026 of 115 to 140 million that we published on the 30th of April. We are focused on improving profitability in factoring and lending, and we are seeing positive results. We meet our CET1 and also our total capital ratio requirements. While Bencovita inspection is still ongoing, we are working on our strategic options to optimize the business model for the future to the benefit of all stakeholders. And we present the new strategy in the second half of the year. Thank you for your attention and let me now open to Q&A.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-on phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. The first question comes from Manuela Meroni of Intesa San Paolo. Good afternoon, and thank you for taking my questions. The first one is on the contagion portfolio. Could you please share with us the amount of your contagion portfolio and what is the portion where you are going to apply the calendar provisioning starting from the third quarter of this year, and the portion where you have to apply the calendar provisioning starting from the first quarter of 2028. The second question is on the possible strategic options and the securitization that you are studying. So I'm wondering if you can share with us the main characteristics of these securitizations in terms of size, tranching, and impact on the P&L, both one-off or recurring, and what are the possible strategic options that you have in mind. And the third question is on the coupon of the 81. I just want to know if you can confirm the payment of the coupon. Thank you.