Banca IFIS Group The BoD approves the 2018 preliminary results

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«In 2018, Banca IFIS continued growing across all business segments thanks to the excellent work of the entire team, generating 147 million Euro in net profit despite the provisions set aside on some significant positions that concerned the whole banking system: excluding these, the result would have been considerably better» said . «In the Enterprises segment, we are consolidating our market share thanks to our ability to offer appropriate and timely solutions. In the last quarter of 2018 we saw strong demand for credit from Small and Medium Enterprises, as factoring volumes and new leases rose by 13% and 20%, respectively, compared to the prior period. As for the NPL segment, in the second half of the year we resumed purchases at a steady pace after the slowdown in the first six months, when in our opinion prices were excessively high. We thus achieved our targets in terms of volumes and price, acquiring 3,6 billion Euro worth of Non-Performing Loans. The par value of the proprietary NPL portfolio amounted to 15,8 billion Euro at 31 December 2018. Last year, continued efficiency gains at our debt collection structures allowed us to recover 181,3 million Euro just through collection operations (+41% from 128 million Euro in 2017). Funding remains buoyant: throughout 2018 we promptly modulated it based on our needs. In mid-January 2019 we launched a new campaign for the rendimax savings account, with an outstanding positioning in terms of interest rates, in order to execute the 2019 funding plan. The results have been excellent: in the past 20 days we have raised approximately 140 million Euro in net new funding».

«In 2019, we expect approximately 140-160 million Euro profits despite the ca. 50% reduction in the positive contribution of the reversal PPA (92 million Euro in 2018), and CET1 to moderately improve with the prospect that the business will continue growing and despite increasingly burdensome banking regulations. In the current year, our strategy will focus on expanding the range of services and products as well as lending volumes to SMEs, consolidating our role as a partner that helps companies grow and reaffirming our support to Italy's economy» added «With the acquisition of FBS, the Banca IFIS Group has become Italy's fourth-largest player in terms of managed and proprietary gross non-performing loans. Today, we represent a joint platform consisting of nearly 1.500 employees and independent professionals/law firms — a true non-performing loan industry. Over the next few months, we will refine our collection strategy by combining the expertise of Banca IFIS and FBS, streamlining non-performing loan servicing operations by implementing digital technologies and innovating our processes».

RECLASSIFIED DATA

The Banca IFIS Group's consolidated income statement for 2018 reported an approximately 146,8 million Euro profit attributable to the Parent company. Below are the operating highlights:

Consolidated net banking income amounted to 576,5 million Euro, +9,7% compared to 2017. The NPL segment was up 48,5% year-on-year thanks to the strong performance in the management of existing portfolios and the value derived from part of the judicial portfolio previously recognised at cost.                    

The Enterprises segment's net banking income was down 4,0% year-on-year, as the growth reported by the Trade Receivables business area (+15,6% compared to the year ended 31 December 2017) was offset by the inevitably lower contribution of the reversal PPA in the Corporate Banking area compared to the prior year, whose positive impact had been influenced by some early repayments.

Net impairment losses totalled 100,1 million Euro (compared to 26,1 million Euro at 31 December 2017) and were largely related to the Enterprises segment. The increase in the Enterprises segment's provisions at 31 December 2018 compared to the prior year was largely attributable to positions classified as bad loans or unlikely to pay in the construction sector, amounting to 60 million Euro. Two of them were related to long-standing counterparties (the relationships began nearly 15 years ago) operating in the Italian infrastructure industry, which concerned the country's entire banking system. The Bank promptly reclassified the positions and calculated impairment losses deemed appropriate based on currently available information. In addition, the data for 2017 reflected reversals of impairment losses resulting from the successful completion of restructuring transactions. 

Operating costs totalled 273,4 million Euro (250,6 million Euro at 31 December 2017, +9,1%). The cost/income ratio stood at 47,4%, compared to 47,7% at 31 December 2017.    

Personnel expenses totalled 111,6 million Euro, up 13,6% (98,3 million Euro at 31 December 2017). The Group's employees numbered 1.638 at 31 December 2018, up 11,4% from the prior year (1.470 units). 85 employees were acquired following the inclusion of the subsidiaries Cap.Ital.Fin. S.p.A. and Credifarma S.p.A in the Group's scope.

Other administrative expenses amounted to 176,5 million Euro, up 15,7% from 152,6 million Euro at 31 December 2017. The line item included 25,1 million Euro in expenses associated with NPLs previously recognised at cost and reclassified to amortised cost in 2018, in accordance with the application of the new model for estimating pre-garnishment order cash flows.

Other net operating income totalled 14,7 million Euro, compared to 0,2 million Euro at 31 December 2017; the increase was mostly attributable to the recovery of 9 million Euro worth of stamp duty costs for retail funding, which are charged back to customers as from 1 January 2018, as well as the 3,9 million Euro gain on bargain purchase arising from the acquisition of Credifarma.

The Group net profit for the year totalled 146,8 million Euro at 31 December 2018, down 18,8% from 180,8 million Euro in December 2017.

As for the contribution of individual segments to the operating and financial results at 31 December 2018, here below are the highlights:

                   

                  Specifically, the area generated 170,0 million Euro in net banking income (147,1 million Euro at 31 December 2017, +15,6%); turnover rose to 13,3 billion Euro (+13,9% from 31 December 2017), and the number of corporate customers was up 11,6% compared to the prior year. Outstanding loans in the Trade Receivables area amounted to 3,6 billion Euro, up 6,0% from 1 January 2018.

                   

                   generated 100,3 million Euro in net banking income, down 25,9% largely because of the lower contribution of the reversal PPA (77,8 million Euro vs 100,7 million Euro at 31 December 2017). This decline was to be expected, as the underlying loans are gradually reaching maturity; in addition, it was fuelled by the early repayments occurred in the prior year. New lending was up 32% compared to 2017. The Corporate Banking segment's outstanding loans totalled 798,2 million Euro, up 17,6% from 1 January 2018—mainly because of the growth in new lending in the Structured Finance area.

                   

                  In 2018, the new financing extended by the was up 7,0% year-on-year (706,7 million Euro in 2018 compared to 660,4 million Euro in 2017). The main drivers were the Equipment Leasing and Capital Market segments, while Auto Leasing maintained its market position despite the contraction in car sales. Loans to customers totalled 1.399,9 million Euro, up 10,2% from 1 January 2018. Net banking income amounted to 51,6 million Euro, essentially in line (+0,5%) with 31 December 2017. The rise in loans offset the decline in profitability caused by increased competition and the fact that old and more profitable portfolios reached maturity.

                   

                  In addition, during the year the Group further refined the statistical models for measuring expected cash flows, especially concerning the positions undergoing judicial operations in the pre-garnishment order stage—which were previously recognised at cost with no contribution to profit or loss. The application of this model to the positions that met the relevant requirements resulted in an approximately 67,6 million Euro positive impact recognised through profit or loss in 2018.

At 31 December 2018, the nominal amount of outstanding receivables totalled 15,8 billion Euro, and their net value was 1.092,8 million Euro. Cash receipts rose from 128,3 million Euro in 2017 to 181,3 million Euro in 2018; the sales of portfolios carried out during the year generated an additional 21,2 million Euro in cash receipts.

Estimated Remaining Collections (ERC) amounted to approximately 2,3 billion Euro.

During the year, the Group purchased mostly unsecured portfolios with a combined gross book value of 3,6 billion Euro at a price of approximately 7%. The net value of the acquired portfolios amounted to 240,9 million Euro.

In 2018, the Group continued with its strategy to consolidate wholesale funding, so as to strike a better balance with retail funding: the first half of the year saw a number of transactions with institutional investors on the debt market. At 31 December 2018, the Group's funding structure was as follows:

As for the assets backing the collateralisation of part of the funding, at 31 December 2018 the Bank held 423 million Euro worth of government bonds (fair value: 410,4 million Euro, -4,1% from 1 January 2018) with limited duration, classified as financial assets at fair value through other comprehensive income.

The fair value loss on said bonds had a negative 9 bps impact on the CET1 (positive 7 bps in the fourth quarter of 2018) of the Banca IFIS Group alone. The negative impact was 5 bps with the consolidation within La Scogliera.

Below is the breakdown of net non-performing exposures in the Enterprises segment (totalling 310,4 million Euro):

Overall, the Enterprises segment reported a Gross NPE Ratio of 9,5% (9,9% at 1 January 2018) and a Net NPE Ratio of 5,2% (6,2% at 1 January 2018).

At the end of the year, the totalled 1.459,0 million Euro, up 6,4% from 1.371,7 million Euro at 1 January 2018.

At 31 December 2018, the consolidated  and Total Own Funds Ratio including the prudential consolidation within La Scogliera amounted to 10,30% and 14,01%, respectively, compared to 11,66% and 16,15% at 31 December 2017.

At 31 December 2018, the consolidated  and Total Own Funds Ratio of the Banca IFIS Group alone, excluding the effect of the consolidation within the parent company La Scogliera, amounted to 13,74% and 18,20%, respectively, compared to 15,64% and 21,07% at 31 December 2017.

In addition, please note that on 28 January 2019 the Bank of Italy required the Banca IFIS Group to adopt the following consolidated capital requirements in 2019, including a 2,5% capital conservation buffer:  

At 31 December 2018, the Banca IFIS Group already met the above prudential requirements.

The Banca IFIS Group transparently and timely discloses information to the market, constantly publishing information on significant events through press releases. Please visit the “Institutional Investor Relations” and “Media Press” sections of the institutional website www.bancaifis.it to view all press releases. Below is a summary of the most significant events occurred during the year:

 

On 7 January 2019, the Group finalised the acquisition of control over FBS S.p.A., a servicing specialist (including both master and special services), manager of secured and unsecured NPL portfolios, due diligence advisor, and investor authorised to conduct NPL transactions. Under the deal, announced on 15 May 2018, Banca IFIS acquired 90% of FBS for 58,5 million Euro.

The Bank has updated its 2019 internal estimates of income statement and balance sheet figures so as to take into account the evolution of the current macroeconomic scenario (BTP/Bund spread level, consensus GDP growth estimate, industrial production and household consumption indicators and expected evolution of interest rates in the second half of 2018), and its 2018 results.

The Bank prepared its 2019 guidance assuming that the macroeconomic scenario does not deteriorate further:

Mariacristina Taormina, Manager charged with preparing the financial reports of Banca IFIS S.p.A, pursuant to the provisions of Art. 154 bis, paragraph 2 of Italian Legislative Decree no.58 dated 24 February 1998, declares that the accounting information included into this press release corresponds to the related books and accounting records.

 

1 Concerning the impact of the first-time adoption of IFRS 9, in the case of the statement of financial position, the comparative information is that at 1 January 2018 to enable comparison on a consistent basis; meanwhile, in the case of the income statement, the comparative information for 2017 has been re-aggregated to ensure accounting consistency with the corresponding amounts at 31 December 2018.2 Net impairment losses on receivables of the NPL segment were entirely reclassified to Interest receivable and similar income to present more fairly this particular business, as they represent an integral part of the overall return on the investment.3 Consolidated own funds, risk-weighted assets and solvency ratios at 31 December 2018 were calculated based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013. Article 19 of the CRR requires consolidating Banca IFIS within the Holding La Scogliera for prudential purposes. For the sake of disclosure, we calculated the same indicators without including the effects of the consolidation within La Scogliera. Therefore, the reported total own funds refers only to the scope of the Banca IFIS Group, thus excluding the effects of the prudential consolidation within the parent La Scogliera S.p.A.

6 Net impairment losses on receivables of the NPL segment were entirely reclassified to Interest receivable and similar income to present more fairly this particular business, as they represent an integral part of the overall return on the investment.

7 Please note that, after the new accounting standard IFRS 9 and the provisions in the 5th update to Circular 262 of the Bank of Italy became effective, the Group restated non-performing loans in accordance with the rules concerning POCI –  Purchased or Originated Credit Impaired – assets as well as its new write-off policy.

8 The reported total own funds refers only to the scope of the Banca IFIS Group, thus excluding the effects of the prudential consolidation within the parent La Scogliera S.p.A. Consolidated own funds, risk-weighted assets and solvency ratios at 31 December 2018 were calculated based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013. Article 19 of the CRR requires to include the unconsolidated holding of the banking Group in equity for the purposes of prudential consolidation.

                                               

Net impairment losses on receivables of the NPL were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net impairment losses represent an integral part of the return on the investment.

 

 

 

Common Equity Tier 1, Tier 1 Capital and total Own Founds included the profits generated at 31 December 2018 net of estimated dividends.

Common Equity Tier 1, Tier 1 Capital and total Own Founds included the profits generated at 31 December 2018 net of estimated dividends.

More news and information about Banca IFIS S.p.A.

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Globe Newswire: 09:05 GMT Monday 11th February 2019

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