Interim / Quarterly Report • Aug 7, 2015
Interim / Quarterly Report
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Banca SISTEMA GROUP
CONSOLIDATED HALF-YEAR FINANCIAL REPORT AS AT 30 JUNE 2015
(Translation from the Italian original which remains the de"nitive version)
| CONSOLIDATED INTERIM DIRECTORS' REPORT | 5 |
|---|---|
| COMPOSITION OF PARENT COMPANY'S MANAGEMENT BODIES | 7 |
| HIGHLIGHTS DATA AS AT 30 JUNE 2015 | 8 |
| PROFILE OF THE PARENT COMPANY | 9 |
| ORGANISATIONAL STRUCTURE | 11 |
| HUMAN RESOURCES | 12 |
| SIGNIFICANT EVENTS DURING THE REFERENCE PERIOD | 13 |
| THE MACROECONOMIC SCENARIO | 14 |
| FACTORING | 18 |
| SERVICING ACTIVITIES | 21 |
| BANKING | 22 |
| TREASURY ACTIVITIES | 26 |
| THE MAIN BALANCE SHEET AGGREGATES | 28 |
| CAPITAL ADEQUACY | 34 |
| ECONOMIC RESULTS | 35 |
| RISK MANAGEMENT AND SUPPORT CONTROL METHODS | 43 |
| RESEARCH AND DEVELOPMENT | 44 |
| TRANSACTIONS WITH RELATED PARTIES | 44 |
| ATYPICAL OR UNUSUAL TRANSACTIONS | 44 |
| SIGNIFICANT EVENTS AFTER THE END OF THE REFERENCE PERIOD | 45 |
| SUBSEQUENT EVENTS AND OUTLOOK AND MAIN RISKS AND UNCERTAINTIES | 47 |
| CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL REPORT | 48 |
| CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS | 49 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 51 |
| CONSOLIDATED STATEMENT OF PROFIT AND LOSS | 52 |
| CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME | 53 |
| STATEMENT OF CHANGES IN CONSOLIDATED EQUITY | 54 |
| CONSOLIDATED STATEMENT OF CASH FLOWS (direct method) | 56 |
| NOTES TO THE FINANCIAL STATEMENTS | 57 |
| ACCOUNTING POLICIES | 59 |
| DETAILED TABLES | 63 |
| CERTICATION OF THE DESIGNATED MANAGER RESPONSIBLE FOR DRAFTING | |
| THE COMPANY ACCOUNTING DOCUMENTSS | 86 |
| INDEPENDENT AUDITORS' REPORT | 87 |
CONSOLIDATED INTERIM DIRECTORS' REPORT
| Board of Directors | ||
|---|---|---|
| Chairman | Prof. | Giorgio Basevi (Independent) |
| Directors: | Mr | Gianluca Garbi |
| Mr | Claudio Pugelli | |
| Prof. | Giovanni Puglisi | |
| Mr | Daniele Pittatore (Independent) | |
| Ms | Lindsey McMurray | |
| Prof. | Giorgio Barba Navaretti | |
| Mr | Matthew James Gary Potter | |
| Mr | Michele Calzolari (Independent) | |
| CEO and General Manager | ||
| CEO | Mr | Gianluca Garbi |
| Board of Statutory Auditors | ||
| Chairman | Mr | Diego De Francesco |
| Standing Auditors: | Mr | Massimo Conigliaro |
| Mr | Biagio Verde | |
| Alternate Auditors: | Mr | Gaetano Salvioli |
| Mr | Marco Armarolli | |
| Executive Committee | ||
| Chairman | Mr | Gianluca Garbi |
| Members | Ms | Lindsey McMurray |
| Prof. | Giorgio Barba Navaretti | |
| Internal Control and Risk Management Committee | ||
| Members | Prof. | Giorgio Basevi |
| Mr | Daniele Pittatore | |
| Mr | Michele Calzolari | |
| Appointments Committee | ||
| Members | Mr | Claudio Pugelli |
| Prof. | Giorgio Basevi | |
| Mr | Michele Calzolari | |
| Remuneration Committee | ||
| Members | Prof. | Giovanni Puglisi |
| Prof. | Giorgio Basevi | |
| Mr | Michele Calzolari | |
| Ethics Committee | ||
| Chairman | Mr | Marco Pompeo |
| Members | Mr | Gianluca Garbi |
| Prof. | Giorgio Barba Navaretti | |
| Supervisory Body | ||
| Chairman | Mr | Michele Calzolari |
| Members | Prof. | Giorgio Basevi |
| Mr | Franco Pozzi |
The Board of Directors and the Board of Statutory Auditors were appointed by decision of the Shareholders' Meeting of 22 April 2014; subsequently, the Board of Directors, on a meeting on the same date, appointed: (i) Mr Gianluca Garbi, CEO and General Manager; (ii) established the Executive Committee, the Internal Control Committee, the Appointments and Remuneration Committee, the Ethics Committee and the Supervisory Body. On 28 April 2015 and 28 May 2015, the Board of Directors, for the purposes of ensuring the compliance of the board committees with the legislative and self-regulatory provisions applicable to listed companies, approved the separation of the Appointments and Remuneration Committee into an Appointments Committee and a Remuneration Committee and the renaming of the Internal Control Committee as the Internal Control and Risk Management Committee.
| Total assets | 2,308,658 2,081,253 |
10.9% | 30 June 2015 |
|---|---|---|---|
| Securities portfolio | 917,215 858,007 |
6.9% | 31 Dec 2014 |
| Factoring trade receivables | 837,687 851,856 |
-1.7% | 30 June 2014 |
| Bank funding and REPOs | 1,259,877 1,060,211 |
18.8% | |
| Term deposits | 560,195 569,410 |
-1.6% | |
| Current accounts | 309,541 311,751 |
-0.7% |
| Pro#t and loss data (€ ,000) | ||
|---|---|---|
| Interest margin | 28,951 24,057 |
20.3% |
| Net fee and commission income | 5,853 5,560 |
5.3% |
| Operating income | 36,864 33,081 |
11.4% |
| Personnel expenses (*) | (6,528) (5,983) |
9.1% |
| Other administrative expenses (*) | (9,042) (9,030) |
0.1% |
| Pro"t before taxes (*) | 19,388 15,251 |
27.1% |
| Performance indicators | |||
|---|---|---|---|
| Cost/income Ratio (*) | 42% 48% |
-11.4% | |
| ROAE (**) | 38% 62% |
-39.5% |
(*) Amounts and indicators calculated using pro#t and loss data adjusted for non-recurrent costs applicable to the listing process, as presented in the paragraph "Financial results" of this Report.
(**) The Return on Average Equity (ROAE) was calculated as the ratio of the pro#t for the annualised period to average shareholders' equity.
The Group is active mainly in the Italian factoring market and specialised in the acquisition, management and #nancing of receivables due to companies by the Italian Public Administration entities ('PA').
In particular, the Banca Sistema Group provides #nancial support to Italian and foreign companies by acquiring trade receivables and VAT credits due from the PA.
The Group operates through a speci#c collection method which is not based on the recovery of receivables through systematic recourse to legal action against the debtors, but favours out-of-court settlements, with the purpose of establishing repayment plans or payment agreements with the assigned debtors, enabling a constant and gradual reduction in the collection time for the receivables and greater core business pro#tability. In such a model, the collection of late payment interest applicable to the PA in the event of payment after 30/60 days constitutes an instrument whose purpose is to discourage delays in payment, as well as a negotiating lever for reaching the aforementioned agreements and speeding up payment times.
Since 2011, the Group's primary objective has been to satisfy the #nancial requirements of companies who supply the PA by factoring, managing and recovering receivables, serving as a link between the public and private sectors. The Group offers a wide range of products aimed at companies which claim receivables from the Public Administration entities and consisting in the provision of factoring services, mainly without recourse, for the management of delays in payment by the Public Administration entities, as well as #nancing services for annual and quarterly VAT credits enjoyed by companies. The Group also offers its customers factoring services with recourse, maturity factoring and reverse factoring. Moreover, the Company offers online factoring and the certi#cation of receivables due from the Public Administration entities. Since 2014, thanks to the partnership established with a specialised operator, the Company has begun to purchase with recourse receivables and manage tax receivables (mainly VAT credits) arising from insolvency proceedings.
In 2014, the Group also launched operations in the private debt factoring sector (both with- and without recourse) and according to the maturity factoring formula.
In addition to operating on the factoring market, which constitutes the Group's core business, the Company has developed new business lines. Already active in managing and recovering receivables on behalf of third parties, through the subsidiary Solvi S.r.l. (merged by incorporation into the Issuer, effective from 01 August 2013), since 2014 Banca Sistema has begun to provide a diversi#ed range of other products and services, such as: (i) the acquisition of credit portfolios derived from the granting of #nancing in the particular form of salaryand pension-backed loans by quali#ed operators and (ii) #nancing to SMEs secured by the Ministry of Economy and Finance Guarantee Fund.
The main source for raising funds to #nance the Group's core business is banking activities, both retail and corporate, including the offer of traditional banking services such as current accounts and saving accounts for private clients, companies and businesses in Italy and Germany, as well as other ancillary banking services. These sources of funding, combined with the access to funding provided by the ECB through the ABACO (Collateralised Bank Assets) Procedure, treasury activities such as the management of Italian Republic securities held in portfolio and the management of the #nancial and credit assets and liabilities ('ALM') of the Issuer, as well as access to the interbank market, allow the Company stable access to reliable sources of liquidity at competitive rates. For the distribution of its products and services, the Issuer uses its own direct network, mainly composed of the Group's subsidiaries and representative of#ces, as well as an indirect network, comprising banks, real estate investment companies, #nancial advisors and #nancial intermediaries (credit brokers), who operate under speci#c distribution agreements concluded with the Issuer.
On 30 June 2015, the Banca Sistema Group comprised the Parent Company, Banca Sistema S.p.A., and Specialty Finance Trust Holding Limited, a company incorporated under U.K. law and fully controlled by the Bank.
The global offering of the Bank's ordinary shares arising from a speci#c capital increase and from the shares already held by the shareholder SOF Luxco S.a.r.l. ended on 29 June 2015. The purpose of this offering was listing on the Star Segment of the MTA - Italian Equities Market organised and managed by Borsa Italiana (Italian Stock Exchange), with an offer price set at € 3.75 per share. Trading of the share began on the MTA on 2 July 2015. During the placement phase, the Bank received € 146 million, excluding the greenshoe option. For details, see the following paragraphs. At the start of the listing, the share capital amounted to € 302 million.
Barclays Bank PLC acted as the global coordinator of the Global Sale and Subscription Offer, Banca Akros acted as the Placement Manager for the Public Offer, while Intermonte acted as Sponsor. The Joint Bookrunners, in addition to Barclays, were Banca Akros, Intermonte and Jefferies.
The organisational chart of the Banca Sistema Group, updated as at 30 June 2015, is shown below:
The following report to the CEO and General Manager:
The Registered Of#ces and Branches of the Banca Sistema Group are as follows:
The human resources within the Group, as at 30 June 2015, are summarised as follows:
| FTE | 30.06.2015 | 31.12.2014 | 30.06.2014 |
|---|---|---|---|
| Senior managers | 14 | 14 | 14 |
| Middle managers (QD3 and QD4) | 32 | 27 | 23 |
| Other personnel | 83 | 72 | 69 |
| Total | 129 | 113 | 106 |
The Group has further reinforced its organisational structure by introducing, during the period, 21 new persons. During the same period, 5 persons left the Group, 4 of whom from the 'employees' level and 1 manager, who was replaced through internal promotion. Banca Sistema's listing on the STAR segment of the MTA involved the appointment of an Investor Relator, who supported the IPO and will manage the relationships with the #nancial markets, once the listing has taken place. Among the new arrivals, 5 persons joined the commercial sector, both factoring and banking; additionally, the Risk, IT, Credit Management and Back Of#ce areas were also reinforced.
The average age of Group employees is 38 for the men and 37 for the women, with women accounting for 42% of the total; these #gures are similar to the 2014 #gures.
The main resolutions passed by the Board of Directors of the Parent Company of Banca Sistema S.p.A. are summarised below.
On 20 February 2015, the following were approved: (I) the '2014 Risks Division Annual Report', (II) the '2014 Compliance Department Annual Report', (III) the '2014 Anti-Money Laundering Department Annual Report' (IV) the 'Compliance Department Annual Report on complaints received by the Bank' (V) the 'Annual Report on the activities carried out by the Internal Audit Department during 2014' and (VI) the Periodic Report to the Board of Directors and Board of Statutory Auditors from the Supervisory Body concerning the application of the 'Organisation, management and control model pursuant to Legislative Decree 231/2001'.
The Board of Directors of Banca Sistema S.p.A., on 26 March 2015, approved (I) the 'Annual report on the procedures to provide investment services and activities and ancillary services and the distribution of #nancial products issued by insurance companies and banks, CONSOB decision no. 17297', (II) the '2014 ICAAP Report', (III) the update to the MiFid Policy and (IV) authorised the publication of the 'New prudential supervisory provisions, Third Pillar information for the public', in accordance with the procedures laid down by the applicable regulations.
The Banca Sistema S.p.A. Shareholders' Meeting, in its session on 26 March 2015, approved (I) the #nancial statements for the year ended 31/12/2014 and (II) the "Remuneration Policies for the year 2015".
During March 2015, with a view to developing the salary-backed loan product (CQS, Cessione del Quinto), commercial agreements were signed with two new specialised operators.
On 28 April 2015, the following were approved (I) the quarterly report from the Internal Control Departments at 31/03/2015 (Risk Reporting, Tableau de bord of the Compliance Department and Tableau de bord of the Internal Audit Department), (II) the annual report from the internal audit department concerning audits conducted on the externalised operating departments, (III) the update of the Liquidity Policy and Contingency Funding Plan, and (IV) the 'Board of Directors Self-Regulation Document' and the document on the "Optimal qualitative and quantitative composition of the Board of Directors", following the completion of the selfregulation process of the Corporate Bodies conducted in accordance with Bank of Italy Circular no. 285, Supervisory positions on bank corporate governance.
On 30 June 2014, the Board of Directors of Banca Sistema S.p.A. approved the following: (I) the 'Complex Securities Management Policy' (II) the "Annual report on the procedures for providing investment services and activities and ancillary services and the distribution of #nancial products issued by insurance companies and banks, CONSOB decision no. 17297".
On 3 June 2015, the Shareholders' Extraordinary Meeting decided on the following:
On the same date, the Shareholders' Meeting #nally approved, in ordinary session, the "Meeting Regulations".As regards the listing process and the relevant decisions, please refer to the paragraph "Signi#cant events after the end of the reference period".
As shown by the ECB Economic Bulletin no. 4/2015 of 18 June 2015, during the #rst quarter of 2015, the real GDP percentage change over the previous period rose to 0.4%, from 0.3% during the fourth quarter of 2014. The data show that the economic recovery has improved owing to several different factors. The ECB monetary policy measures are contributing to the easing of the general #nancial conditions and facilitating access to credit, both for SMEs and larger companies.
In addition, the fall in oil prices is boosting the real disposable income and pro#tability of companies, supporting private investments and consumption, while the weakening of the Euro exchange rate has bolstered exports. In line with the growth in recovery, the labour market in the Euro Area has
continued to improve slightly, as shown by the gradual fall in unemployment, which, nevertheless, remains high both in the entire Euro Area and, at national level, in the majority of countries.
The monetary policy measures have contributed to a generalised easing of the #nancial conditions, which remain highly accommodating. In&ation expectations are high compared with the minimums of mid-January and the #nancing conditions for households and businesses have continued their positive development. The effects of these measures are impacting positively on the economy and making an additional contribution to improving prospects.
Against a background of extremely low interest rates, money market and loan growth have continued their recovery. Partly as a consequence of the expanded Asset acquisition plan (PAA), monetary indicators have improved further and lending has continued to grow, albeit at modest levels. In April, the decline in loans to non-#nancial companies continued to ease and the growth rate for loans to households increased slightly. These trends were supported by a signi#cant fall in bank loan rates in most of the Euro Area, from summer 2014, and also by signs of improvement both in the supply and demand of such loans. Globally, recent trends are con#rming that the ECB monetary policy measures are contributing to restoring the correct functioning of the monetary policy transmission mechanism and easing bank lending conditions. Indeed, the bank lending survey (BLS) carried out in the Euro Area in April 2015 by the ECB shows that the easier conditions for the granting of loans are continuing to support further reinforcement of the growth in lending, especially to businesses. Moreover, the greater competition between banks during the #rst quarter of 2015 has encouraged an easing of lending conditions, which has gone hand in hand with a growth in loan applications from companies. This adds to the fact that, as the survey on the access to #nance of enterprises in the Euro Area has con#rmed, the improving conditions on the credit market concern both small and medium-sized enterprises (SMEs) and not only large businesses.
The yields of long-term AAA government bonds, after falling to historical lows around mid-April, returned, in early June, to the levels recorded in January, in line with the announcement of the expanded asset acquisition plan (PAA).
Nevertheless, in a longer-term perspective, the majority of the government bond yields in the Euro Area remain very low across all maturities.
The corporate bonds and shares yields were driven by those of the sovereign bond markets.
The real Euro exchange rate towards the main trade partners of the Euro Area remained essentially stable over the last few months.
In June 2015, market volatility was caused mainly by the Greek crisis, which caused signi#cant variations in the yields of securities in Euro, especially in peripheral countries. The impact was partly mitigated by the plentiful liquidity injected by the European Central Bank through the MRO transactions and the QE securities purchase programme, decided in the #rst few months of the year.
The recent agreement reached between the European Institutions and the Greek government has restored the con#dence of the operators, with a resulting reduction in the volatility and yields of government securities. Despite the fact that the Greek Parliament has pledged to adhere to its commitments to creditors and implement a system of macroeconomic reforms, enabling a gradual recovery of the economic cycle over the next few years, there is still some uncertainty concerning the outcome of the #nal agreement, notwithstanding the belief that the country's exit from the Euro Zone has been avoided.
The macroeconomic forecasts for the Euro Area issued by Eurosystem experts in June and contained in the ECB Economic Bulletin no. 4/2015 of 18 June 2015 provide for annual GDP growth in real terms of 1.5% in 2015, 1.9% in 2016 and 2% in 2017 and for average annual in&ation to reach 0.3% in 2015, 1.5% in 2016 and 1.8% in 2017.
According to forecasts, the economic recovery in the Euro Area should strengthen over the next three years, with positive contributions to growth from both internal and external demand.
As shown in the ECB Economic Bulletin no. 2/2015 of 17 April 2015, during the fourth quarter of 2014, the fall in GDP came to an end, thanks to the acceleration in exports, the continuing growth in consumption and a slight increase in investments. During the #rst few months of 2015, the con#dence of households and businesses grew considerably, even if the relaunch of the industrial sector cycle awaits consolidation.
Household consumption continued to expand moderately. Foreign trade was the main spur to GDP growth, with considerable acceleration in exports and more modest growth in imports. Added value increased in the tertiary sector, while falling in the construction, industry (in the strictest sense) and agriculture sectors.
During the #rst quarter of 2015, gross domestic product (GDP) rose by 0.3% compared with the previous quarter, while growth was 0.1%, compared with the #rst quarter of 2014 (Source: ISTAT, 29 May 2015).
The Ita-coin indicator developed by the Bank of Italy, which provides an estimate of the quarterly changes in GDP free from short-term &uctuations, shows improvement but continues to indicate the residual weakness of the underlying dynamics of the economy. More favourable signs are provided by the qualitative surveys, which indicate a framework of greater con#dence in the decisions of companies and households, especially as regards the future.
The Bulletin data indicate that since the autumn of 2014, industrial production has shown signs of improvement, con#rmed only in part during the #rst few months of the year. During the #rst quarter of 2015, industrial production recorded modest growth. However, the indicators taken from the surveys at companies have improved dramatically and anticipate a recovery in production. In March, con#dence continued to rise across all the main sectors, reaching the levels recorded four years ago.
Operators are considerably more optimistic with regard to the trend in demand for their products, both current and forecast, in particular for the foreign component, as well as the conditions for access to credit.
Households' expenditure continues to rise, albeit moderately, supported mainly by the acquisition of durable goods. Over the #rst few months of the year, the consumer con#dence index rose sharply, reaching June 2002 levels in March. The rise was particularly marked as regards decisions concerning the general economic framework and labour market prospects.
Exports grew over the last few months of 2014, in particular thanks to the recovery in demand from European Union countries. An analysis of the prospects of sales abroad indicate an expansive framework.
During the fourth quarter of 2014, the recovery in total hours worked was accompanied by a slight fall in employment. During the #rst few months of 2015, employment remained stable and the unemployment rate fell through lower participation in the labour market. Employment prospects are brighter.
In&ation is close to zero and the analysts of the main research and analysis companies believe it will remain at this value for the whole of 2015. However, over the #rst few months of the year, consumer expectations were improved slightly. The decline in loans to companies continues further, re&ecting, above all, weak demand. Loan conditions eased slightly for larger companies, while the tightening affecting smaller companies came to an end. Construction companies still face dif#culties in accessing loans, since they are characterised by a greater number of non-performing items. The interest rates on loans to companies and households continue to fall.
1 Ita-coin provides a monthly estimate of the trends in economic activity, using information from a broad set of.
According to ISTAT2economic provisions for 2015, Italian gross domestic product (GDP) will rise by 0.7% in real terms, followed by growth of 1.2% in 2016 and 1.3% in 2017. In 2015, the positive contribution of domestic demand net of stocks to GDP growth will be 0.3 percentage points, while that of net foreign demand will be 0.4 percentage points. Over the following two years, cyclical consolidation will generate a growing contribution from domestic demand (+0.8 and +1.1 percentage points), while the consequent rise in imports will reduce the contribution of net foreign demand in 2017. In 2015, households' expenditure will record a positive change of 0.5% in real terms, caused by the improvement in disposable income. Over the following two years, private consumption will grow (+0.7% and +0.9%), supported by a gradual rise in employment. Investments will start to grow again this year (+1.2%), driven by the improved conditions for access to loans and the expectations associated with a recovery in production.
The capital accumulation process is forecast to recover at a sustained pace in 2016 (+2.5%) and with greater intensity in 2017 (+2.8%). The rise in employment (+0.6% in terms of work units) will be accompanied by a moderate fall in the unemployment rate, which will consolidate at12.5% in 2015. In 2016, the unemployment rate will fall to 12.0% and the work units will rise signi#cantly (+0.9%).
This development will continue more rapidly in 2017, with the unemployment rate falling to 11.4% and the work units growing by 1.0%.
2 ISTAT: issue of 07 May 2015
As highlighted by the Italian factoring trade association (Assifact), during 2014 the factoring market con#rmed the growth of the last few years recording a 7% increase. Factoring in Italy also showed growth of almost 3%, despite the economic crisis. The factoring volumes in Italy in terms of turnover exceeded 177 billion, representing 8% of the global market and 13% of the European market. This is an excellent result when you consider that GDP in the Euro Area grew by only 0.9% in 2014, despite more favourable expectations.
Therefore, factoring is keeping its promises and remains a trump card. Over the last thirty years, the factoring sector has grown four times faster than the global economy. In 1980, overall factoring volumes around the world were 50 billion; in 2015, the volume of annual turnover at global level exceeded € 2,300 billion (in 2000 it was 600 billion).
During 2014, we observed that the Government and the Public Administration entities in general were paying close attention to late payments by the PA. Recent legislation has promoted recognition of debts for the purposes of discharging previous arrears. However, these measures seem to have lost their momentum and the #rst half of 2015 saw a gradual deterioration in payment times.
Some 50 billion was allocated for the 2013-2014 period for the purposes of encouraging the repayment of trade payables by the Public Administration entities. Furthermore, during 2014, it is estimated that PA paid companies trade payables of around 10 billion, compared with approximately 19 billion in 2013. Indeed, these measures did generate an average improvement in payment times. Nevertheless, since last autumn, this trend has been reversed. The current average is 165 days. However, this is an average: repayment times range from 90 days in Lombardy to 2 years in certain regions and municipalities in the South.
Moreover, during the year new legislative instruments have been issued to ease the transfer to the #nancial system of payables due to companies from Public Administration entities. Yet despite the efforts of governments over the last few years and the media focus on the issue of late payments by the Public Administration, this issue remains a serious problem for Italy and represents approximately 3.1% of GDP. These #gures exclude receivables purchased by #nancial intermediaries; if these are taken into consideration, the total rises to € 70 billion.
The 'Debt certi#cation platform' developed by the Ministry of Economy and Finance has not updated the monitoring of debts accrued by the PA since 31 December 2013. Nevertheless, according to the European Payment Report, the payment times of the Italian public authorities continue to be much greater than the average in the other European countries.
The latest Bank of Italy annual report and the Intrum Justitia reports show that the Italian Public Administration entities are the worst payers in Europe. A study conducted by the CGIA of Mestre (Association of artisans and small enterprises) highlighted the extremely negative consequences of this unfavourable behaviour on the Italian business climate. According to the analyses of the CGIA of Mestre, at least 76% of Italian companies are suffering from a shortage of liquidity caused by the delay in receiving payments.
As for the national factoring market, without recourse factoring or factoring receivables sold at an agreed price represented over 66% of the total. An analysis of bad loans in our country, conducted by the trade association Assifact, has shown that, as regards factoring exposures, bad loans represented 3.46% of total exposures at the end of 2014. This data is particularly reassuring, albeit slightly worse than the previous year, when compared with the ratio of bad loans to total bank loans (approximately 10%).
In terms of turnover, the #rst few months of 2015 have con#rmed the positive trend recorded in 2014. Volumes purchased in the #rst quarter of the year increased by +4.58% and positive data is also provided from an initial summary analysis of the second quarter of 2015.
Due to its characteristics, the factoring sector represents an effective opportunity for using resources, especially when you consider the capital absorption and the capacity of the companies in the sector to support the #nancial component with an offer in terms of services and opportunities for growth.
At the end of 2014, with a view to tackling tax evasion more effectively, the so-called 'split payment' legislative instrument was introduced. This new measure requires the Public Administration entities, at the time of payment, to pay the VAT owed directly to the tax authorities, paying the supplier only the taxable amount. The modi#cation to the VAT system, introduced through the 2015 Stability Law, entered into force on 1 January of the same year, had a considerable impact on companies' liquidity. In the factoring sector, however, the number of tax receivables between companies has grown due to the aforementioned measure, involving companies which, in the past, were either not at all or only occasionally structurally entitled to a tax credit.
The same Law also established the "reverse charge" mechanism, vetoed by the European Union, which has nonetheless promoted split payment.
Data from Assifact, the trade association for factoring companies, have con#rmed that the so-called indirect factoring has recorded strong growth over the last few years.
The instrument calls for a deal between the factoring company and a major debtor which, through an agreement, enables the granting of favourable conditions to its suppliers. The Assifact #ndings, with reference to the #rst 5 months of 2015, show that indirect factoring reached a total of €3.4 billion and growth of 23% compared with the same period of the previous year.
Factoring has consolidated its position as the principle instrument for managing trade payables and receivables and a valid alternative to other means of #nancing for supporting suppliers of both Public Administration entities and individuals. It is also thanks to factoring that the country has managed to limit the drastic consequences of the longest post-war #nancial crisis to date.
The governance and #nancing of credit is essential for growth in our country. Bank of Italy data con#rm that trade receivables represented 35% of the total #nancial assets of Italian companies at the end of 2014.
The turnover for the #rst half of 2015 for the Banca Sistema Group was € 600 million, representing growth of 36% compared with the same period of 2014. Considering the third party receivables managed, total volumes came to € 747 million as at 30 June 2015.
Outstanding volumes totalled € 898 million as at 30 June 2015, a reduction of 3.7% compared with the € 932 million at the end of 2014, as a result of signi#cant collections from exposures to the Public Administration recorded in the #rst half of 2015 and totalling € 611 million (an increase of 9% compared with the collections recorded in the second half of 2014). The chart to the right shows the impact of debtors on the outstanding portfolio as at 30 June 2015. The Group's core business remains the Public Administration entities segment.
The Group works through both direct assignments by companies and within the framework of regional agreements for restructuring or reorganising public entity debts.
These operations include traditional factoring agreements, as well as reverse factoring agreements with highly reliable public entities which are seeking to use factoring with their suppliers in their role as debtors.
The following table shows the factoring turnover per product type.
| PRODUCT | 1H 15 | 1H 14 | € Change | % Change |
|---|---|---|---|---|
| Without recourse | 440.7 | 367.5 | 73.2 | 20% |
| VAT | 45.1 | 22.7 | 22.4 | 99% |
| With recourse | 103.2 | 43.2 | 60.0 | 139% |
| Maturity | 10.9 | 8.6 | 2.3 | 27% |
| TOTAL | 599.9 | 441.9 | 158.0 | 36% |
Tax credits include VAT credits from outstanding insolvency proceedings, totalling € 2.2 million. This business was launched at the end of the previous #nancial year, with the support of a special market operator.
For the purposes of its debt recovery activities, the Group uses both its own internal structures, equipped with signi#cant skills and experience in the analysis, management and monitoring of the debt collection process, and a network of external operators specialised in debt recovery and active across the entire country.
The network of freelancers used by the Company enables an exact adjustment of the debt collection activities with regard to each speci#c debtor and, at the same time, the replacement of representatives should they fail to achieve satisfactory results or an increase in the number of operators when it becomes necessary to focus on speci#c areas.
The Group provides debt management and recovery services on behalf of third parties, operating mainly for companies which claim receivables (mainly in the healthcare sector) from Public Administration entities or healthcare structures.
To this end, the Group uses both its own internal structures, equipped with signi#cant skills and experience in the analysis, management and monitoring of the debt collection process, and a network of external operators specialised in debt recovery and active across the entire country. The network of freelancers used by the Company enables an exact adjustment of the debt collection activities with regard to each speci#c debtor and, at the same time, the replacement of representatives should they fail to achieve satisfactory results or an increase in the number of operators when it becomes necessary to focus on speci#c areas. Thanks to the considerable experience accrued in the collection of debts through factoring and the capabilities acquired in managing relationships with the managers and of#ces of public and private entities through its network of specialised staff, the Group offers its customers an ongoing and effective reduction in the collection time for receivables due from both PA entities and individuals.
On 30 June 2015, the Group signed a series of agreements with a network of persons (the 'Collectors') operating across the whole of Italy, tasked with managing, within speci#c geographical areas, the collection activities of a prede#ned amount of debts on behalf of the Group and to the bene#t of customers who turn to the Company for the collection of their receivables.
More speci#cally, the Group operates through 14 Collectors who, in accordance with the banking provisions applicable to the Company and the non-competition requirements in force from time to time, conduct the following activities: (I) verifying the certainty, liquidity and collectability of the debts; (II) establishing a relationship between the Group and the debtors to facilitate the collection of the debts and (III) continuously updating the information and data available.
On 30 June 2015, the amount of third-party receivables managed by the Group totalled € 147 million, while the fee and commission income generated by this business segment totalled € 506 thousand.
During 2014, Banca Sistema also launched and concluded a project with a two-fold purpose: #rstly, to improve the debt collection processes and secondly, to migrate the Group's IT systems to a new platform.
The funding policy of the banking division is strictly linked to changes in trade loans and market conditions. Today, funding is also geared towards current accounts, whereas, in the past, term deposits took precedence. This choice was based on the need to make the relationship with the customers less volatile, and at the same time ensure a fee and commission return through the offering of traditional services. A positive effect on the average cost of funding can be added to the above.
The Group therefore achieved its goals, by setting a ceiling limit to the rates on term deposits, which have always remained in line with market rates, without being a market leader and structuring a current account with easy terms and a good return. Consequently, the Group will continue to operate consistently with this strategy.
Total term deposits as at 30 June amounted to €540 million (the #gure does not include accruals pertaining to the period), a positive change (+ €33 million) with respect to the same period of the previous year.
There were 10,983 individual customers with term deposits as at 30 June 2015, a fall compared with the #gures as at 30 June 2014 (11,078). The average deposit was € 49 thousand, an increase compared with the #gures as at 30 June 2014 (€ 46 thousand). The breakdown of funding by term is shown on the right.
The number of customers with a current account as at 30 June 2015 moved from 2,838 (31 December 2014) to 3,280, while the current account balance as at 30 June 2015 was € 309 million, revealing a net negative balance of -€ 2 million.
Indirect funding from assets under administration as at 30 June 2015 totalled €224 million (€362 million as at 30 June 2014).
The breakdown is as follows:
| Type (€ million) | 30 June 2015 | 30 June 2014 | € Change | % Change |
|---|---|---|---|---|
| Bonds | 111,820 | 203,519 | -91,699 | -45.06% |
| Equities | 105,448 | 96,870 | 8,578 | 8.86% |
| Warrants | 217 | 60,044 | -59,827 | -99.64% |
| Funds | 6,651 | 1,633 | 5,018 | 307.29% |
| TOTAL | 224,136 | 362,066 | -137,930 | -38.10% |
During 2015, a process was launched to expand the offer of products/services such as new funds and to strengthen the structure through the hiring of new personnel in the Private Banking area. In addition, the opening of branches in Pisa and Padua generated a territorial expansion of customers with assets under administration in Banca Sistema.
In 2014, the Banca Sistema Group started granting loans to SMEs, guaranteed by the SME guarantee fund of the Ministry of Economic Development (law 662/96).
This instrument allows companies to access secured credit under easy terms, and allows the Group to grant low risk loans with a reduced impact on the capital in view of the Government guarantee (up to 80%);
the average guarantee coverage for the Group is 80%.
In the #rst half of 2015, the Group disbursed € 46.5 million (€ 20.8 million in 2014), with € 59.9 million outstanding at the end of the period.
During the #rst half of 2015, the volumes disbursed were more than double the total in 2014.
| 1H 15 | FY 14 | € Change | % Change | |
|---|---|---|---|---|
| No. of applications | 103.0 | 52.0 | 51.0 | 98% |
| Volumes disbursed | 46.5 | 28.8 | 25.7 | 124% |
As the graphs below show, the geographic and sector distribution is very varied, enabling the Group to bene#t from a highly diversi#ed portfolio.
The following shows the volumes disbursed per geographic area.
The Banca Sistema Group entered the salary- and pension-backed loan (CQS/CQP) market in 2014, through the acquisition without recourse from other specialised portfolio intermediaries of receivables arising from the granting of these speci#c types of #nancing. As at 30 June, the Bank had entered into 3 distribution agreements.
that allows customers to allocate up to a #fth of their salaries to the payment of loan instalments.
The volumes acquired amounted to about €54 million, broken down between private-sector employees (22%), pensioners (50%) and public-sector employees (28%). Therefore, over 78% of the volumes refer to pensioners and employees of the PA, which remain the Bank's main debtor.
A salary-backed loan (CQS) is a consumer loan product
CQS disbursed volumes - Breakdown
| 1H 15 | FY 14 | € CHANGE | % CHANGE | |
|---|---|---|---|---|
| No. of applications | 2,623.0 | 656.0 | 1,967.0 | 300% |
| Volumes | 53.6 | 13.4 | 40.2 | 300% |
As shown in the table, the amounts disbursed in the #rst half of 2015 were considerably more than in 2014, as a result of the two new agreements concluded by the Bank during the period.
CQS disbursed volumes - Breakdown by geographical area
The treasury function consists mainly in managing the operating and structural liquidity generated by the Bank's core business, characterised by the considerable movement of &ows arising from the ordinary acquisition of receivables without recourse.
The treasury is responsible for assessing, within a shortterm time frame, the impacts of funding and lending transactions, generated by the intermediation activities, on the Bank' #nancial balance, for the purposes of preparing suitable measures able to offset the positive or negative #nancial balances arising from the succession of incoming and outgoing #nancial &ows, while ensuring economically viable conditions.
In this regard, the treasury seeks out pro#table forms of short-term investment for temporary surpluses of #nancial resources which would otherwise represent non-interest bearing or low yield assets for the Bank; alternatively, it is the responsibility of the treasury to identify sources which will enable the Bank to address, at an acceptable cost, the liquidity needs generated by ordinary management.
The treasury is also responsible for managing the Group's #nancial and credit assets and liabilities (ALM) and is required to maintain a suitable dynamic relationship between medium- to long-term assets and liabilities, ensuring diversi#cation of the sources and maturities.
The management of treasury also involves the recourse to the main settlement markets and to the major #nancial markets for trading securities.
The need to swiftly address imbalances in corporate #nancial &ows requires the treasury function to have a certain amount of liquidity reserves in the form of money market instruments (short-term deposits with other banks or instruments which can be easily sold on the market, such as short-term government bonds); in addition, the treasury is entrusted with short-term borrowing transactions, conducted through the collection of interbank deposits or by accessing Bank of Italy credit as well as credit in the form of advances on current account securities pledges (Repurchase Agreements, Buy and Sell Back, Stock Lending).
A portfolio of owned securities has been established in order to better support liquidity commitments through the short-term investment in Italian Government Bonds. The portfolio of owned securities as at 30/06/2015 amounted to € 917 million (858 as at 31/12/2014) and only comprised Italian short-term government bonds.
During the period, the portfolio of owned securities did not change in terms of value, type of securities and residual duration. In particular, as at 30 June 2015, the duration of the portfolio was 9.3 months (8.5 months as at 31 December 2014).
Traded volumes increased compared to the previous year, along with the number and amount of monetary settlements by the Treasury Area.
In the #rst half of 2015, the transactions involving government bonds totalled € 7,198 billion (compared with € 5,928 billion traded in the #rst half of 2014). Government bonds are mainly traded on the MTS Italian markets (in which the Bank trades as a market dealer), the European Bond Market (EBM), through the BondVision deal-to-client platform, or on BrokerTec. The performance of investments in securities was in line with the improvement in spreads until the #rst quarter of 2015, i.e. with the improvement in the perception of risk by the markets in respect of peripheral countries in the Euro Area, before slowing from May onwards.
Wholesale funding represented about 59% of the total as at 30 June 2015 and mainly comprised repurchase agreements traded on the MTS MMF Repo platform and re#nancing mechanisms with the ECB (54% as at 31 December 2014). These transactions were carried out during the period by using treasury portfolio Italian Government securities as the underlying asset, along with eligible trade receivables due from Public Administration entities arising from factoring activities (ABACO).
The choice between the above-mentioned funding sources mainly depends on the contingent market performance of short-term liquidity. In particular, compared with 31 December 2014, priority was given to repurchase agreements, rather than the MRO transactions proposed by the ECB, due to their cost.
The Group also used the interbank deposit market both through the e-MID market and bilateral agreements with other banks.
During the #rst half of 2015, the volumes exchanged on the MMF REPO market amounted to approximately € 43,757 billion (€ 32,1 billion for the whole of 2014), while deposits on the e-MID and OTC markets totalled € 1.7 billion.
Short and medium-term operating cash &ows were always maintained well above the levels needed to ensure the conversion of assets into cash at any moment throughout the period.
The comments on the main aggregates on the asset side of statement of #nancial position are shown below.
| ASSETS (€ ,000) | 30.06.2015 | 31.12.2014 | CHANGE |
|---|---|---|---|
| Cash and cash equivalents | 87 | 66 | 21 |
| Financial assets held for trading | - | 63 | (63) |
| Financial assets available for sale | 917,215 | 858,007 | 59,208 |
| Due from banks | 46,013 | 16,682 | 29,331 |
| Loans to customers | 1,326,403 | 1,193,754 | 132,649 |
| Equity investments | 2,596 | 2,448 | 148 |
| Property and equipment | 1,149 | 1,201 | (52) |
| Intangible assets | 1,891 | 1,904 | (13) |
| of which: goodwill | 1,786 | 1,786 | - |
| Tax assets | 3,989 | 2,752 | 1,237 |
| Other assets | 9,315 | 4,376 | 4,939 |
| Total assets | 2,308,658 | 2,081,253 | 227,405 |
The Group ended the #rst half of 2015 with total assets of approximately € 2.3 billion, 10.9% up on the results at the end of the previous year.
The Bank's securities portfolio is entirely composed of Italian government bonds with an average duration of about 9.3 months as at 30 June 2015 (the average duration at the end of 2014 was 8.5 months), in line with the Group's investment policies to keep securities with durations of less than 12 months. Compared with year end, the nominal value of the securities grew from € 860 to € 919 million. Following market tensions in June caused by the "Greek crisis", the fair value, as at 30 June, of the Italian government bonds in the portfolio was negative by € 1.3 million. By mid-July, the prices of securities started to rise again, bringing the fair value to positive levels.
As at 31 December, there was only one credit default swap contract, recognised among "Financial assets held for trading", which was settled before the contractual deadline on 28 February 2015, following the collection of the underlying credit portfolio subject to hedging.
| LOANS TO CUSTOMERS (€ ,000) | 30.06.2015 | 31.12.2014 | CHANGE | % |
|---|---|---|---|---|
| Factoring | 837,687 | 851,856 | (14,169) | -1.7% |
| Reverse repurchase agreements | 334,554 | 290,316 | 44,238 | 15.2% |
| Loans to SME | 59,872 | 18,664 | 41,208 | 220.8% |
| Salary/pension-backed loans (CQS/CQP) | 65,367 | 13,228 | 52,139 | 394.2% |
| Current accounts | 15,409 | 15,876 | (467) | -2.9% |
| Compensation and Guarantee Fund | 13,194 | 3,556 | 9,638 | 271.0% |
| Other receivables | 320 | 258 | 62 | 24.0% |
| Total | 1,326,403 | 1,193,754 | 132,649 | 11.1% |
The "Loans to customers" item is mainly composed of outstanding loans in the factoring receivables portfolio, totalling € 838 million (-2% compared with year end). On the other hand, government-backed loans to SMEs are rising, along with salary- and pension-backed loans.
€ 45 million (€ 53 million as at 31 December 2014 and € 23 million as at 30 June 2014), which recorded a 96% increase compared with the #rst half of 2014.
The factoring receivables turnover for the #rst half of 2015 totalled € 600 million (€ 1.2 billion as at 31 December 2014 and € 441 million as at 30 June 2014), recording a 36% increase compared with the #rst half of 2014. This amount includes tax receivables of
Government-backed loans to SMEs disbursed during the #rst half of 2015 totalled € 46.5 million (€ 20.8 million as at 31 December 2014 and € 3.2 million as at 30 June 2014), while the volume of the salary- and pensionbacked loans acquired was € 53.6 million (€ 13 million as at 31 December 2014 and € 0.8 million as at 30 June 2014).
The following table shows the quality of the credit in the 'loans to customers' item, without considering the amount relating to reverse REPO.
| LOANS TO CUSTOMERS | 30.06.15 | 31.12.14 | |
|---|---|---|---|
| Bad loans | 22,266 | 11,439 | |
| Unlikely to pay | 11,278 | 10,078 | |
| Gross exposure | Past due | 21,386 | 20,680 |
| Non-performing | 54,930 | 42,197 | |
| Performing (excluding REPO) | 943,940 | 866,171 | |
| Total | 998,870 | 908,368 | |
| Provision for individual adjustments | 4,566 | 2,473 | |
| Provision for collective adjustments | 2,455 | 2,457 | |
| Total provision for adjustments | 7,021 | 4,930 | |
| Net exposure | 991,849 | 903,438 |
The impact of net non-performing loans on the total outstanding portfolio is low and amounts to 5%. The increase in bad loans compared with 31 December 2014 is physiological, related to the Bank's business.
The Bad loans ratio (calculated as the ratio of net bad loans to the total of loans to customers, net of reverse REPO) changed from 1.01% as at 31 December 2014 to 1.82% as at 30 June 2015, even though it remained at reasonable levels.
Loans to customers also include temporary investments in reverse repurchase agreements of € 335 million (€ 290 million at the end of 2014). The amounts deposited against the cash used in the Compensation and Guarantee Fund for #nance transactions in repurchase agreements with bank customers rose in accordance with the greater number of REPO operations.
Equity investments include the Bank's equity stake of
25.80% in CS Union S.p.A. (a company created from the merger between the companies Candia S.p.A. and St.Ing. S.p.A.), operating on the bad #nancial and commercial loans management market, as well as in the management and recovery of receivables between individuals.
The increase of € 148 thousand represents the pro-quota result for the period.
Other assets include amounts being processed spanning period-end and trade invoices to be issued and mainly attributable to collection. The item is physiological and the increase compared with the previous #nancial year is mainly linked to a receivable relating to a deposit totalling € 1.5 million made in order to participate in the acquisition of a tax credit arising from an insolvency procedure and an equal increase of € 1.5 million in advances paid for interest with holding tax.
Comments on the main aggregates of balance sheet liabilities are given below.
| LIABILITIES AND SHAREHOLDERS' EQUITY (€ ,000) | 30.06.2015 | 31.12.2014 | CHANGE |
|---|---|---|---|
| Due to banks | 166,535 | 821,404 | (654,869) |
| Due to customers | 1,991,504 | 1,153,797 | 837,707 |
| Securities issued | 20,104 | 20,109 | (5) |
| Tax liabilities | 3 | 6,248 | (6,245) |
| Other liabilities | 45,473 | 36,441 | 9,032 |
| Employee termination indemnities | 1,364 | 1,173 | 191 |
| Provisions for risks and charges | 384 | 1,030 | (646) |
| Valuation reserves | (872) | 2 | (874) |
| Reserves | 67,096 | 13,059 | 54,037 |
| Share capital | 8,451 | 8,451 | - |
| Pro#t for the period/year | 8,616 | 19,539 | (10,923) |
| Total liabilities and shareholders' equity | 2,308,658 | 2,081,253 | 227,405 |
Wholesale funding represents about 59% of the total (54% as at 31 December 2014), and mainly comprises repurchase agreements traded through the MTS platform (classi#ed under 'due to customers' since there is no direct balancing entry with banks) and, to a lesser extent, re#nancing operations with the ECB and funding from other banks through the E-Mid market and term deposits.
There is only residual funding from bond loans, amounting to about 2% of the total.
Retail customer deposits remained in line with the previous #nancial year and were mainly linked to the SI Conto! Deposito product.
| DUE TO BANKS (€ ,000) | 30.06.2015 | 31.12.2014 | CHANGE | % |
|---|---|---|---|---|
| Due to Central banks | 35,000 | 730,020 | (695,020) | -95.2% |
| Due to banks | 131,535 | 91,384 | 40,151 | 43.9% |
| Current accounts and demand deposits | 10,485 | 36,366 | (25,831) | -71.0% |
| Term deposits | 121,050 | 55,018 | 65,982 | 119.9% |
| Total | 166,535 | 821,404 | (654,869) | -79.7% |
The composition of the "Due to banks" item has changed compared with the end of the previous #nancial year following greater funding from repurchase agreements instead of re#nancing operations with the ECB,
since during the period REPOs proved more convenient than Central Bank rates.
Funding from other banks rose compared with the previous #nancial year.
Customer deposits, following what has been illustrated above, recorded a 73% increase compared with the previous #nancial year, mainly following greater use of funding through repurchase agreements, rather than ECB funding, in order to #nance the securities portfolio. The breakdown is as follows:
| DUE TO CUSTOMERS (€ ,000) | 30.06.2015 | 31.12.2014 | CHANGE | % |
|---|---|---|---|---|
| Term deposits | 560,195 | 569,410 | (9,215) | -1.6% |
| Funding (repurchase agreements) | 1,093,342 | 238,807 | 854,535 | 357.8% |
| Current accounts and demand deposits | 309,541 | 311,751 | (2,210) | -0.7% |
| Other amounts due | 28,426 | 33,829 | (5,403) | -16.0% |
| Total | 1,991,504 | 1,153,797 | 837,707 | 72.6% |
The year-end stock of term deposits showed a slight decline compared with the previous #nancial year, as a result of negative deposits of € 12 million; gross deposits during the #rst six months were € 203 million, against withdrawals caused mainly by non-renewals totalling € 215 million (net deposits for the whole of 2014 were positive and amounted to € 35 million, € 10 million in the #rst half of 2014).
Other amounts due include payables related to receivables acquired but not funded.
The composition of the securities issued is the same as at 31 December 2014 and is as follows:
The main changes in the provision for risks and charges were as follows:
"Other liabilities" mainly include payments received after the end of the period by the assigned debtors and which were still being assigned and items being processed during the days following period-end, as well as trade payables and tax liabilities.
The following shows the changes in shareholders' equity since 31 December 2014:
| SHAREHOLDERS' EQUITY (€ ,000) |
31.12.2014 | ALLOCATION OF PROFIT |
OTHER CHANGES |
NET RESULT FOR THE PERIOD |
30.06.2015 | |
|---|---|---|---|---|---|---|
| Dividends Reserves | ||||||
| Share capital | 8,451 | 8,451 | ||||
| Reserves | 13,059 | 17,567 | 36,470 | 67,096 | ||
| Valuation reserves | 2 | (874) | (872) | |||
| Pro#t (Loss) for the year/period |
19,539 | (1,972) | (17,567) | 8,616 | 8,616 | |
| Total | 41,051 | 83,291 |
The other shareholders' equity reserves include the amount collected during the placement for the new shares issued during the listing phase (10 million shares at the unit price of € 3.75) less the listing costs of € 1.5 million, net of deferred tax assets of € 0.5 million deductible over #ve years. In accordance with the international accounting standards, all incremental costs strictly linked to the listing process were capitalised (chie&y placement commissions for the new shares and consultancy costs) in proportion to the number of new shares issued compared with the total number of new shares.
The following table provides a summary of the changes in reserves:
| (€ ,000) | OTHER RESERVES |
|
|---|---|---|
| Other reserves | 37,500 | |
| Capitalised listing costs | (1,525) | |
| Deferred tax assets | 504 | |
| Total reserves | 36,479 |
The share capital increase from € 8.4 million to € 9.7 million was recorded on 2 July after the entry in the Companies' Register records; the remainder of the cash deposited was allocated to the share premium reserve.
The reconciliation between the net result and shareholders' equity of the parent company and the #gures from the consolidated #nancial statements is shown below.
| (€ ,000) | NET RESULT |
SHAREHOLDERS' EQUITY |
|---|---|---|
| Banca Sistema's balances as at 30/06/2015 | 8,804 | 84,126 |
| Assumption of value of investments | ||
| Pro#t (loss)/shareholders' equity-subsidiaries | (188) | (835) |
| Other changes | ||
| Adjustments to transfers of investments | ||
| Banca Sistema's consolidated balances as at 30/06/2015 | 8,616 | 83,291 |
By means of a letter dated 05 May 2014, the Parent Company informed the Bank of Italy of its desire to exercise its option to be exempt from #ling consolidated reports (an option laid down in paragraph 1.4 of circular 115 "Instructions for preparing banks' supervisory reports on a consolidated basis").
Provisional information concerning the regulatory capital and capital adequacy of Banca Sistema is show below.
| OWN FUNDS (€ ,000) AND CAPITAL RATIOS | 30.06.15 | 31.12.14 |
|---|---|---|
| Common Equity Tier 1 (CET1) | 82,038 | 37,849 |
| TIER1 | 8,000 | 8,000 |
| Additional Tier 1 capital (AT1) | 90,038 | 45,849 |
| TIER2 | 12,000 | 12,000 |
| Total Own Funds (TC) | 102,038 | 57,849 |
| Total risk weighted assets | 458,869 | 363,771 |
| Ratio - CET1 | 17.9% | 10.4% |
| Ratio - AT1 | 19.6% | 12.6% |
| Ratio - TCR | 22.2% | 15.9% |
Total own funds, as at 30 June 2015, totalled € 102 million.
In the absence of a formalised dividend policy, for the sole purposes of calculating own funds as at 30 June 2015, retained earnings included in the Common Equity Tier 1 capital, totalling € 7.7 million, were estimated by taking as a reference the average pay out over the last three years, as laid down in Delegated Regulation (EU) No 241/2014 supplementing Regulation (EU) No 575/2013 of the European Parliament.
| INCOME STATEMENT OF PROFIT AND LOSS (€ ,000) | 30.06.2015 | 30.06.2014 | CHANGE |
|---|---|---|---|
| Interest margin | 28,951 | 24,057 | 4,894 |
| Net fee and commission income | 5,853 | 5,560 | 293 |
| Dividends and similar income | - | 33 | (33) |
| Net income from trading activities | 109 | 672 | (563) |
| Pro#t from disposal or repurchase of #nancial assets | 1,951 | 2,759 | (808) |
| Operating income | 36,864 | 33,081 | 3,783 |
| Net value adjustments due to loan impairment | (2,091) | (2,018) | (73) |
| Net income from banking activities | 34,773 | 31,063 | 3,710 |
| Personnel expenses | (6,528) | (5,983) | (545) |
| Other administrative expenses | (9,042) | (9,030) | (12) |
| Net allowance for risks and charges | (10) | (300) | 290 |
| Net value adjustments to property and equipment/intangible assets | (154) | (89) | (65) |
| Other operating income (expenses) | 128 | (410) | 538 |
| Operating expenses | (15,606) | (15,812) | 206 |
| Pro#t (loss) from equity investments | 221 | - | 221 |
| Pro"t from current operations before taxes | 19,388 | 15,251 | 4,137 |
| Income taxes for the period | (6,029) | (5,408) | (621) |
| Pro"t (loss) for the period | 13,359 | 9,843 | 3,516 |
The economic results for the #rst half of 2015, represented and commented on below, have been normalised in order to eliminate non-recurrent costs pertaining to the listing process; these costs are mainly attributable, as described in detail in the #nal part of the paragraph, to placement and consultancy costs as well as from a cost resulting from the revaluation of the long-term incentive plan recognised in the previous #nancial years.
The net result for the #rst half was € 13.4 million (+36%), a dramatic increase compared with the corresponding six months of the previous year.
| INTEREST MARGIN (€ ,000) | 30.06.2015 | 31.12.2014 | € CHANGE | % CHANGE |
|---|---|---|---|---|
| Interest and similar income | ||||
| Credit portfolios | 39,653 | 34,987 | 4,666 | 13.3% |
| Securities portfolio | 616 | 2,228 | (1,612) | -72.4% |
| Other | 231 | 889 | (658) | -74.0% |
| Total interest income | 40,500 | 38,104 | 2,396 | 6.3% |
| Interest expense and similar charges | ||||
| Due to banks | (498) | (1,105) | 607 | -54.9% |
| Due to customers | (10,435) | (11,955) | 1,520 | -12.7% |
| Securities issued | (616) | (987) | 371 | -37.6% |
| Total interest expense | (11,549) | (14,047) | 2,498 | -17.8% |
| Interest margin | 28,951 | 24,057 | 4,894 | 20.3% |
Total interest income is mainly composed of revenue generated from the factoring receivables portfolio, which totalled € 39.7 million (+13% compared with the previous six months), representing 98% of the total. Moreover, the contribution from pension- and salarybacked loan products and SME funding also rose, contributing 5.6%. Compared with the previous six months, however, the result shows less dependence on interest from securities, which fell by € 1.6 million due to a reduction in government bond yields during the period. Moreover, there was a smaller contribution from Other interest income mainly caused by a decrease in income generated by revenue from investments in hot money transactions and reverse repurchase agreements with institutional clients, which fell by € 0.5 million overall compared with the previous six months. Compared with the previous period, the increase in interest from the factoring portfolio is marked by greater average volumes compared with 2014, as well as an increase in interest generated by agreements.
Funding costs fell compared with the same period of the last year following a general reduction in market rates which has had a positive impact on wholesale funding, accompanied by a reduction in deposit and current account rates; the effect of the reduction in current account funding rates has been mitigated since the average volumes obtained in the #rst half of 2015 were considerably higher than in 2014.
Interest due to banks is mainly attributable to the cost of funding from the ECB, which was reduced mainly through a limited use of this form of #nancing.
Interest payable on bond loans issued bene#ts from loans which expired during 2014.
Funding through REPOs, as a result of the current interbank rates and ECB policies, has not generated overall expenses.
| COMMISSION MARGIN (€ ,000) | 30.06.2015 | 30.06.2014 | € CHANGE | % CHANGE |
|---|---|---|---|---|
| Fee and commission income | ||||
| Collection activities | 506 | 592 | (86) | -14.5% |
| Factoring activities | 5,834 | 5,078 | 756 | 14.9% |
| Other | 326 | 321 | 5 | 1.6% |
| Total fee and commission income | 6,666 | 5,991 | 675 | 11.3% |
| Fee and commission expenses | ||||
| Placement | (528) | (344) | (184) | 53.5% |
| Other | (285) | (87) | (198) | 227.6% |
| Total fee and commission expenses | (813) | (431) | (382) | 88.6% |
| Net fee and commission income | 5,853 | 5,560 | 294 | 5.3% |
Net fees and commissions, equalling € 5.9 million, grew by 5.3%.
The volumes of the purchase of receivables connected with products that involve higher management fees and commissions increased compared with the previous period. Fees and commissions from customers for collection activities fell slightly due to the lower number of third party invoices managed.
Other fee and commission income mainly includes commissions linked to the placement of insurance sureties, collection and payment services and the holding and management of current accounts (€ 37.2 thousand).
Fee and commission expenses include, under the placement item, the costs of origination of factoring receivables for € 437 thousand (€ 259 thousand in the previous period) while the remaining part includes the returns to third party intermediaries for the placement of the SI conto! Deposito product.
The other fee and commission expenses include commissions due for interbank collection and payment services. In 2015, the item also includes € 63 thousand for commissions from the CDS premium taken out at the end of 2014 and € 57 thousand for commissions reversed to Insurance Companies for premiums placed and collected by the Bank.
| RESULTS OF THE SECURITIES PORTFOLIO (€ ,000) |
30.06.2015 | 30.06.2014 | € CHANGE | % CHANGE |
|---|---|---|---|---|
| Pro"t (Loss) on trading | ||||
| Pro#t (loss) realised on trading portfolio | ||||
| debt securities | 109 | 672 | (563) | -83.8% |
| Total | 109 | 672 | (563) | -83.8% |
| Pro"t (loss) from disposal or repurchase | ||||
| Pro#t (loss) on AFS portfolio debt securities | 1,951 | 2,759 | (808) | -29.3% |
| Total | 1,951 | 2,759 | (808) | -29.3% |
| Total pro"t (loss) from securities portfolio | 2,060 | 3,431 | (1,371) | -40.0% |
In the #rst half of 2015, pro#ts generated by the owned portfolio and from the trading portfolio made a smaller contribution compared with the same period of the previous year, following less favourable market trends and a decrease in the volumes traded on behalf of third parties, respectively.
| PERSONNEL EXPENSES (€ ,000) | 30.06.2015 | 30.06.2014 | € CHANGE | % CHANGE |
|---|---|---|---|---|
| Wages and salaries | (5,004) | (4,681) | (323) | 6.9% |
| Social security contributions and other costs | (1,258) | (1,037) | (221) | 21.3% |
| Directors' and statutory auditors' remuneration | (266) | (265) | (1) | 0.4% |
| Total | (6,528) | (5,983) | (545) | 9.1% |
The Group's human resources moved from 106 as at 30 June 2014 to 129 at period-end.
The increase in personnel expenses, totalling € 545 thousand, is therefore mainly attributable to the growth in the size of workforce, with an average of more than 15 units, switching from an average of 109 to 124.
| OTHER ADMINISTRATIVE EXPENSES (€ ,000) |
30.06.2015 | 30.06.2014 | € CHANGE | % CHANGE |
|---|---|---|---|---|
| Servicing and collection activities | (3,329) | (3,391) | 62 | -1.8% |
| Consultancy | (713) | (997) | 284 | -28.5% |
| Computer expenses | (1,462) | (1,481) | 19 | -1.3% |
| Rent and related fees | (794) | (715) | (79) | 11.0% |
| Indirect taxes and duties | (735) | (646) | (89) | 13.8% |
| Advertising | (363) | (412) | 49 | -11.9% |
| Auditing fees | (123) | (183) | 60 | -32.8% |
| Other | (305) | (181) | (124) | 68.5% |
| Car hire and related fees | (291) | (232) | (59) | 25.4% |
| Legal and notary expenses | (269) | (158) | (111) | 70.3% |
| Expense reimbursement and entertainment | (225) | (196) | (29) | 14.8% |
| Membership fees | (127) | (135) | 8 | -5.9% |
| Infoprovider expenses | (120) | (110) | (10) | 9.1% |
| Maintenance of movables and real properties | (90) | (115) | 25 | -21.7% |
| Telephone and postage expenses | (87) | (74) | (13) | 17.6% |
| Discretionary payments | (9) | (4) | (5) | 125.0% |
| Total | (9,042) | (9,030) | (12) | 0.1% |
Other administrative expenses, totalling € 9 million, remained essentially in line with the previous six months.
The amounts due to third parties for the collection and servicing of trade receivables are in line with the #rst half of 2014; in particular, payment for third-party servicers has fallen mainly because of the lower volumes managed and a reduction in the percentage cost applied to income.
Pro#t (loss) from equity investments re&ects the net proquota result of the company CS Union S.p.A. from 1Q15.
The other management income/expenses item as at 30 June 2015 have deviated from the six months of the previous year mainly through the allocation of a one-off payment of € 0.3 million made in the #rst half of 2014, in response to a request for hedging from the National Interbank Deposit Guarantee Fund for the default of Banca Tercas.
The allowance to the provision for risks and charges, totalling € 10 thousand, was the result of an allocation made during the #rst half of 2014 and totalling € 300 thousand, following the elimination of a potential risk connected to the collection of a tax credit acquired without recourse and the simultaneous allowance resulting from an estimate of the contribution to the new bank resolution fund.
The following shows the reconciliation of the normalised and statutory Statements of pro#t and loss.
| STATEMENT OF PROFIT AND LOSS (€ ,000) |
30.06.2014 NORMALISED |
IPO COSTS | 30.06.2015 STATUTORY |
|---|---|---|---|
| Interest margin | 28,951 | - | 28,951 |
| Net fee and commission income | 5,853 | - | 5,853 |
| Dividends and similar income | - | - | - |
| Pro#t (Loss) on trading | 109 | - | 109 |
| Pro#t from disposal or repurchase of #nancial assets | 1,951 | - | 1,951 |
| Operating income | 36,864 | - | 36,864 |
| Net value adjustments due to loan impairment | (2,091) | - | (2,091) |
| Net income from banking activities | 34,773 | - | 34,773 |
| Personnel expenses | (6,528) | (4,389) | (10,917) |
| Other administrative expenses | (9,042) | (2,218) | (11,260) |
| Net allowance for risks and charges | (10) | - | (10) |
| Net value adjustments to property and equipment/intangible assets | (154) | - | (154) |
| Other operating income (expenses) | 128 | - | 128 |
| Operating expenses | (15,606) | (6,607) | (22,213) |
| Pro#t (loss) from equity investments | 221 | - | 221 |
| Pro"t from current operations before taxes | 19,388 | (6,607) | 12,781 |
| Income taxes for the period | (6,029) | 1,864 | (4,165) |
| Pro"t (loss) for the period | 13,359 | (4,743) | 8,616 |
Personnel expenses include a gross variable component recognised to the management and linked to the Bank's IPO. The other administrative expenses mainly include share placement commissions, consultancy costs and other costs linked to the listing process.
Directives 2014/49/EU (Deposit Guarantee Schemes Directive - DGS) of 16 April 2014 and 2014/59/EU (Bank Recovery and Resolution Directive - BRRD) of 15 May 2014 were introduced as part of the strategic objective of reinforcing the single market and systemic stability, along with the Single Resolution Mechanism, which was also established by EU Regulation no. 806/2014 of 15 July 2014.
The new directive calls for Italian banks to switch from an ex-post contribution system to a mixed system, which provides for funds to be paid ex-ante until reaching, within 10 years from the entry into force of the directive (before 03 July 2024), a minimum target level, amounting to 0.8% of covered deposits. The contributions of each entity are calculated according to the ratio of the amount of their own deposits to the overall amount of the Country's protected deposits.
The Directive required transposition by the Member States in their national legal systems before 03 July 2015. On the date of this Report, the Directive had not yet been transposed by the Italian State.
The FITD (National Interbank Deposit Guarantee Fund) has indicated its intention of collecting, for 2015, only the contribution related to the second half of the year. In consideration of the noti#cation from the FITD and since the legal obligation to pay the 2015 annual contribution will apply in the second half of 2015, no allocation was made to the statement of pro#t and loss. Based on currently available information, it is estimated that the expenses for the Bank could be around € 200 thousand gross of the relevant tax effects, considering the possibility of providing part of the #nancial resources through payment obligations, up to a maximum of 30% of the contribution owed.
Directive 2014/59/EU de#nes the new resolution rules, which shall apply from 01 January 2015 to all the European Union banks in the event of #nancial dif#culties, even if only prospective. To this end, the aforementioned directive calls for national resolution funds to have #nancial resources which must be provided through compulsory contributions from authorised credit institutions. In this case, too, the #nancing mechanism is mixed. Amounts must be paid in advance until reaching a minimum target level of 1% of covered deposits by 31 December 2024. The contributions from each entity are calculated according to the ratio of the amount of own liabilities (net of own funds and covered deposits) to the overall amount of liabilities for all the authorised credit institutions across the country. In order to achieve the target level, the #nancial resources provided by the credit institutions may include payment commitments, up to a maximum of 30%. The allocation of resources from national resolution funds during 2015 will be transferred to the European Single Resolution Fund (SRF) managed by a new European Resolution Authority (Single Resolution Board - SRB), whose establishment is provided for by Regulation no. 806/2014, which introduced the Single Resolution Mechanism (SRM), which will enter into force on 01 January 2016. On the date of drafting of this half-year report, the regulations for transposing the directive into the national legal system have not yet been issued and unambiguous procedures for recognising expenses have not yet been de#ned. Against such an uncertain background, the Bank has estimated an allocation of € 310 thousand, taking into account the fact that 30% of the aforementioned contribution may be covered through secured payment commitments.
For the purposes of accelerating the emergence of losses on receivables, aligning Italy with the other EU countries and eliminating the competitive gap that has existed to date, article 16 of the Decree calls for write-downs and losses on receivables due from customers, recognised in the #nancial statements of banks and insurance companies, to be fully deductible both for IRES and IRAP purposes in the relevant #nancial year.
In an initial phase, however, the deductibility for writedowns and losses on receivables for Ires and Irap purposes is limited to 75 per cent.
The remaining 25% may be deducted in various percentages up to the 2025 #scal period (e.g. 5% of the residual amount in 2016, 8% in 2017, 10% in 2018 etc.).
This measure both replicates and reinforces that implemented through the Stability law for 2013, by means of which, from 2013 onwards, the write-downs and losses on receivables due from customers recorded in the #nancial statements had become "deductible on a straight-line basis in the #nancial year during which they are recognised and the four subsequent years".
In order to manage the signi#cant risks to which it is or could be exposed, the Group has set up a risk management system that re&ects the characteristics, size and complexity of its operations.
In particular, this system is based on four fundamental principles: appropriate supervision by corporate bodies and departments; adequate risk management policies and procedures (both in terms of exposure to credit risk and the disbursement of credit); suitable methods and adequate tools for risk identi#cation, monitoring and management and adequate measurement techniques; comprehensive internal controls and independent auditing.
The "Risk Management System" is monitored by the Risk and Compliance Division, which ensures that capital adequacy and the degree of solvency with respect to its business are kept under constant control. In order to reinforce its ability to manage corporate risks, the Group established the Risk Management Committee, which supports the CEO in de#ning strategies, risk policies and pro#tability targets.
The Risk Management Committee continuously monitors the relevant risks and any new risks, even if only potential, resulting from changes in the working environment or the planned Group operations.
In accordance with Bank of Italy Circular no. 263/06 as amended, the Parent Company, Banca Sistema S.p.A., has tasked the Internal Control and Risks Committee with the job of coordinating the second and third level Control Departments; to that end, the Committee allows integration and interaction between these Departments, encouraging synergy, reducing any overlaps and supervising operations.
The methods used by the Group to measure, assess and aggregate risks are approved by the Board of Directors, based on proposals from the Risk Division, subject to approval by the Risk Management Committee. In order to measure the 'Pillar 1 risks', the Group has adopted standard methods to calculate the capital requirements for Prudential Regulatory purposes.
In order to evaluate non-measurable "Pillar 2 risks", the Group adopts - where possible - the methods stipulated under Supervisory regulations or those established by trade associations. If there are no such indications, standard market practices by operators that work at a level of complexity and operation comparable to the Group are also assessed.
No research and development activity was carried out in the #rst half of 2015.
Transactions with related parties and connected parties, including the relative authorisation and disclosure procedures, are governed by the "Procedure governing transactions with associated parties" approved by the Board of Directors and published on the Internet site of the Parent Company, Banca Sistema S.p.A.
Transactions between the Group companies and related parties or connected parties were carried out in the interests of the Company, including within the scope of ordinary operations; these transactions were carried out in accordance with market conditions and, in any event, on the basis of mutual #nancial advantage and in compliance with all procedures.
With respect to transactions with parties who exercise administration, management and control functions in accordance with article 136 of the Consolidated Law on Banking, they are included in the Executive Committee decision, speci#cally authorised by the Board of Directors and with the approval of the Statutory auditors, subject to compliance with the obligations provided under the Civil Code with respect to matters relating to the con&ict of interest of directors.
Please refer to the Notes to the #nancial statements for information concerning individual transactions with related parties.
During the #rst half of 2015, the Group did not carry out atypical or unusual transactions, as de#ned in Consob Communication no. 6064293 of 28 July 2006.
For the purposes of fully exploiting the activities of Banca Sistema and supporting its growth, the Shareholders' Meeting, acting on a proposal from the Board of Directors, in its session of 26 March 2015, resolved to approve the proposal to apply for admission of the Company's ordinary shares for listing on the STAR Segment of the MTA - Italian Equities Market organised and managed by Borsa Italiana S.p.A.
The listing and resulting expansion of the shareholder base will enable the Bank to reinforce the visibility of its business model and boost, in such a way, its standing within the reference market, including through the entry into the capital of quali#ed, national and international investors.
Following the launch of the Banca Sistema listing project, the Board of Directors, in its meeting of 26 March 2015, approved the new 2015-2018 three-year project, thus modifying the one approved by the Board on 13 February 2014.
From an organisational and governance perspective, the Board of Directors, during its meetings of 26 March 2015, 28 April 2015 and 28 May 2015, in accordance with the stipulations of the primary and secondary legislation in force, completed the adjustment of the corporate governance system, approving various internal procedures, reorganising the advisory committees, as well as appointing an investor relator and a designated manager responsible for drafting the company accounting documents.
On 3 June 2015, the extraordinary shareholders' meeting thus debated the share capital increase from € 8,450,526.24 up to the nominal maximum amount of € 10 million, as a divisible increase and against payment, with the exclusion of option rights, pursuant to art. 2441, paragraph 5, of the Italian Civil Code, for the purposes of the public subscription and sale offer for the listing of the Company's shares, conditional upon the issuing, by Borsa Italiana S.p.A., of the measure admitting the Company's shares for trading on the STAR segment of the MTA - Italian Equities Market (provided the prerequisites exist), organised and managed by Borsa Italiana S.p.A.: on 15 June 2015, the Bank of Italy issued the relevant declaration of compliance.
On 17 June 2015, Borsa Italiana, through measure no. 8073, provided for the listing on the stock exchange of the Bank' shares for trading on the MTA - Italian Equities Market. On 18 June 2015, Consob issued a measure approving the prospectus, which enabled the launch of the public share offer: on this date, the institutional offer was launched, while, on 19 June 2015, the retail offer also began. Both offers ended on 29 June: the offer price was set at € 3.75 per share, equivalent to company capitalisation of around € 302 million, calculated on the basis of the Offer Price. Trading began on 2 July 2015.
On this date the conditions precedent as adopted by the extraordinary meeting on 3 June 2015 were checked; in particular, the share capital was subscribed and paid up, totalling € 1,200,000.00 with the issuing of 10,000,000 ordinary shares, each with a nominal value of € 0.12. Therefore, the new, fully subscribed and paid up share capital is € 9,650,526.24, subdivided into 80,421,052 shares, each with a nominal value of € 0.12.
On 15 July, the sale/purchase agreement for 200 nominal stakes of € 5 million, representing 0.066% of the share capital of Bank of Italy, was signed, with the simultaneous transfer of the holding certi#cate. The transfer is subject to the condition subsequent of veri#cation, by the Bank of Italy, of the existence of the legal requirements for Banca Sistema to be the holder of the stakes.
Lastly, on 17 July 2015, the Coordinator of the Global Sale and Subscription Offer, Barclays Bank PLC, including in the name and on behalf of the members of the Institutional Placement Consortium, fully exercised the Greenshoe Option granted by the Selling Shareholder, SOF Luxco S.a.r.l., for a global total of 3,897,865 ordinary Banca Sistema shares. The acquisition price for the shares which were the subject of the Greenshoe Option was € 3.75 per share - corresponding to the Offer Price for shares which are the subject of the Global Sale and Subscription Offer - for an overall amount of around € 14.6 million gross of the commissions and costs related to the operation. The settlement of the shares related to the Greenshoe Option occurred on 21 July 2015.
Globally, the Global Sale and Subscription Offer, including the Greenshoe Option, concerned 42,876,525 ordinary Banca Sistema shares, totalling 53.32% of the share capital, for an overall value of around € 160.8 million gross of the commissions and costs related to the operation.
Based on evidence from the Shareholders' Register and more recent information available, as at 2 July 2015, the shareholders with stakes of more than 5%, the threshold above which Italian law (art.120 of the Consolidated Law on Finance) requires disclosure to the investee company and Consob, were as follows:
| SHAREHOLDERS | % HELD |
|---|---|
| SGBS S.r.l. (Management Company) | 23.10% |
| Fondazione Sicilia | 7.40% |
| Fondazione Cassa di Risparmio di Alessandria | 7.40% |
| Fondazione Pisa | 7.40% |
| Schroders | 6.73% |
| Free Float | 47.97% |
During the second half of 2015, the growth in factoring volumes recorded during the #rst half of the year, is expected to continue, along with a greater contribution from loans to SMEs and salary-backed loans.
The interest margin, based on current market conditions, will continue to bene#t from essentially stable funding costs.
Over the reference period, new strategic commercial agreements and framework agreements were concluded, which have enabled the Group to launch a diversi#cation process for the products offered.
The objective is still to broaden the customer base and
exploit opportunities presented by the Banca Sistema Group's excellent strategic positioning on the Italian market.
Net income from the listing and consequent bolstering of the Bank's Own Funds will facilitate the achievement of its strategies and, therefore, more accurately, the strengthening and consolidation of the factoring 'core business' as well as the growth of the new business lines introduced in 2014, while promoting the possibility of continuing with the diversi#cation of the business through the identi#cation of new opportunities, including through strategic acquisitions.
Milan, 30 July 2015
On behalf of the Board of Directors
The Chairman
Prof. Giorgio Basevi
The CEO
Gianluca Garbi
AS AT 30 JUNE 2015
| Amounts in thousands of Euro | ||||
|---|---|---|---|---|
| Assets | 30.06.2015 | 31.12.2014 | ||
| 10. | Cash and cash equivalents | 87 | 66 | |
| 20. | Financial assets held for trading | - | 63 | |
| 40. | Financial assets available for sale | 917,215 | 858,007 | |
| 60. | Due from banks | 46,013 | 16,682 | |
| 70. | Loans to customers | 1,326,403 | 1,193,754 | |
| 100. | Equity investments | 2,596 | 2,448 | |
| 120. | Property and equipment | 1,149 | 1,201 | |
| 130. | Intangible assets | 1,891 | 1,904 | |
| of which goodwill | 1,786 | 1,786 | ||
| 140. | Tax assets | 3,989 | 2,752 | |
| a) Current | 366 | 41 | ||
| b) Deferred | 3,623 | 2,711 | ||
| of which pursuant to Law 214/2011 | 3,149 | 2,261 | ||
| 160. | Other assets | 9,315 | 4,376 | |
| Total assets | 2,308,658 | 2,081,253 |
| Liabilities and shareholders' equity | 30.06.2015 | 31.12.2014 | |
|---|---|---|---|
| 10. | Due to banks | 166,535 | 821,404 |
| 20. | Due to customers | 1,991,504 | 1,153,797 |
| 30. | Securities issued | 20,104 | 20,109 |
| 80. | Tax liabilities | 3 | 6,248 |
| a) Current | - | 6,234 | |
| b) Deferred | 3 | 14 | |
| 100. | Other liabilities | 45,473 | 36,441 |
| 110. | Employee termination indemnities | 1,364 | 1,173 |
| 120. | Provisions for risks and charges | 384 | 1,030 |
| b) Other provisions | 384 | 1,030 | |
| 140. | Valuation reserves | (872) | 2 |
| 170. | Reserves | 62,771 | 8,734 |
| 180. | Share premium reserve | 4,325 | 4,325 |
| 190. | Share capital | 8,451 | 8,451 |
| 220. | Pro#t (loss) for the period (+/-) / year | 8,616 | 19,539 |
| Total liabilities and shareholders' equity | 2,308,658 | 2,081,253 |
| Amounts in thousands of Euro | |||
|---|---|---|---|
| Items | 30.06.2015 | 30.06.2014 | |
| 10. | Interest and similar income | 40,500 | 38,104 |
| 20. | Interest expense and similar charges | (11,549) | (14,047) |
| 30. | Interest margin | 28,951 | 24,057 |
| 40. | Fee and commission income | 6,666 | 5,991 |
| 50. | Fee and commission expenses | (813) | (431) |
| 60. | Net fee and commission income | 5,853 | 5,560 |
| 70. | Dividends and similar income | - | 33 |
| 80. | Pro#t (Loss) on trading | 109 | 672 |
| 100. | Pro#t (loss) from disposal or repurchase of: | 1,951 | 2,759 |
| a) receivables | |||
| b) #nancial assets available for sale | 1,951 | 2,759 | |
| c) #nancial assets held to maturity | - | ||
| d) #nancial liabilities | - | ||
| 120. | Operating income | 36,864 | 33,081 |
| 130. | Net value adjustments/write-backs due to impairment of: | (2,091) | (2,018) |
| a) receivables | (2,091) | (2,018) | |
| 140. | Net income from banking activities | 34,773 | 31,063 |
| 180. | Administrative expenses: | (22,177) | (15,333) |
| a) personnel expenses | (10,917) | (5,983) | |
| b) other administrative expenses | (11,260) | (9,030) | |
| 190. | Net allowance for risks and charges | (10) | (300) |
| 200. | Net adjustments to/recoveries on property and equipment | (123) | (73) |
| 210. | Net adjustments to/recoveries on intangible assets | (31) | (16) |
| 220. | Other operating income (expenses) | 128 | (410) |
| 230. | Operating expenses | (22,213) | (15,812) |
| 240. | Pro#t (loss) from equity investments | 221 | - |
| 270. | Pro#t (Loss) on disposal of investments | - | - |
| 280. | Pro"t (loss) before tax from continuing operations | 12,781 | 15,251 |
| 290. | Taxes on income from continuing operations | (4,165) | (5,408) |
| 300. | Pro"t after tax from continuing operations | 8,616 | 9,843 |
| 320. | Pro#t (loss) for the period | 8,616 | 9,843 |
| 340. | Parent company pro"t for the period | 8,616 | 9,843 |
| Items | 30.06.2015 | 30.06.2014 | |
|---|---|---|---|
| 10. | Pro"t (Loss) for the period | 8,616 | 9,843 |
| Other income items net of taxes without reversal to the | |||
| statement of pro"t and loss | |||
| 20. | Property and equipment | - | - |
| 30. | Intangible assets | - | - |
| 40. | De#ned bene#t plans | 10 | 22 |
| 50. | Non-current assets held for sale | - | - |
| 60. | Share of valuation reserves connected with investments | - | - |
| carried at equity: | - | - | |
| Other income items net of taxes with reversal to the statement | |||
| of pro"t and loss | - | - | |
| 70. | Hedges of foreign investments | - | - |
| 80. | Foreign exchange differences | - | - |
| 90. | Cash &ow hedges | - | |
| 100. | Financial assets available for sale | 864 | 488 |
| 110. | Non-current assets held for sale | - | - |
| 120. | Share of valuation reserves connected with investments | - | |
| carried at equity: | - | ||
| 130. | Total other comprehensive income (net of tax) | 874 | 510 |
| 140. | Comprehensive income (Items 10+130) | 9,490 | 10,353 |
| 150. | Total consolidated comprehensive income pertaining to | ||
| minority interests | - | - | |
| 160. | Total consolidated comprehensive income pertaining to the | ||
| Parent Company | 9,490 | 10,353 |
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|||||||
| 3 1 0 2 2. 1 1. 3 at e c n a al B |
c n a al b g n ni e p o in e g n a h C |
4 1 0 2 1. 0 1. 0 at e c n a al B |
s e rv e s e R |
s n io at c lo al r e th o d n a s d n e d vi Di |
s e rv e s e r in s e g n a h C |
s re a h s w e n f o e u s Is |
s re a h s ry u s a e tr f o e s a h rc u P |
s d n e d ivi d ry a in rd o ra xt E |
s nt e m ru st n i ty ui q e in s e g n a h C |
s re a h s ry u s a re t n o s e iv at v ri e D |
s n o ti p O k c o t S |
s nt e m st e v n i ty ui q e in s e g n a h C |
e m o c in e 4 1 v 0 si 2 n r e fo h re p m o C |
ui q e 4 ' 1 rs 0 e 2 d ol 6 h 0 re 0 a 3 h t s a p u o r G |
|
| Ca ital p e: |
|||||||||||||||
| a) azi i or din ari on e |
8, 45 1 |
- | 8, 45 1 |
- | - | - | - | - | - | - | - | - | - | 8, 45 1 |
|
| b) altr zio ni e a |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| Sov zzi di iss ion rap pre em e |
4, 32 5 |
- | 4, 32 5 |
- | - | - | - | - | - | - | - | - | - | - | 4, 32 5 |
| Ris erv e |
2, 45 6 |
- | 2, 45 6 |
6, 29 8 |
- | ( 10) |
- | - | - | - | - | - | - | - | 8, 74 4 |
| a) di uti li |
2, 70 8 |
- | 2, 70 8 |
6, 29 8 |
- | - | - | - | - | - | - | - | 9, 00 6 |
||
| b) altr e |
( 25 2) |
- | ( 25 2) |
- | ( 10) |
- | - | - | - | - | - | ( 26 2) |
|||
| Ris e d alu taz ion erv a v e |
( 25 7) |
- | ( 25 7) |
- | - | - | - | - | - | - | - | 51 0 |
25 3 |
||
| Str ent i d i ca ital um p e |
- | - | - | - | - | - | - | - | - | - | - | - | - | ||
| Az ion i pr rie op |
- | - | - | - | - | - | - | - | - | - | - | - | - | ||
| Uti le ( Pe rdit e) di iod per o |
7, 00 2 |
- | 7, 00 2 |
( 6, 29 8) |
( 70 4) |
- | - | - | - | - | - | 9, 84 3 |
9, 84 3 |
||
| Pa trim io net to on |
21 97 7 , |
- | 21 97 7 , |
- | ( 70 4) |
( 10 ) |
- | - | - | - | - | - | - | 10 35 3 , |
31 61 6 , |
Amounts in thousands of Euro
| 30.06.2015 | 30.06.2014 | |
|---|---|---|
| A. OPERATING ACTIVITIES | ||
| 1. Managementinterest | 2,426 | 13,894 |
| ƒ income collected |
40,500 | 38,104 |
| ƒ interest expense paid |
(11,549) | (14,048) |
| ƒ dividends and similar income |
- | - |
| ƒ net fees and commissions |
5,853 | 5,560 |
| ƒ personnel expenses |
(16,552) | (5,983) |
| ƒ net premiums collected |
- | - |
| ƒ other insurance income/expenses |
- | - |
| ƒ other income |
(11,143) | (9,739) |
| ƒ other expenses |
- | - |
| ƒ taxes and duties |
(4,684) | - |
| ƒ income/expenses relating to groups of assets held for disposal, net of taxes |
- | - |
| 2. Cash \$ows from (used in) "nancial assets | (227,697) | 43,910 |
| ƒ #nancial assets held for trading |
172 | 672 |
| ƒ #nancial assets designated at fair value through pro#t and loss |
- | - |
| ƒ #nancial assets available for sale |
(58,131) | (8,218) |
| ƒ receivables due from customers |
(134,740) | (4,239) |
| ƒ due from banks: on demand |
(29,331) | 57,442 |
| ƒ due from banks: other receivables |
- | - |
| ƒ other assets |
(5,667) | (1,747) |
| 3. Cash \$ows generated by/used in "nancial liabilities | 190,800 | (54,448) |
| ƒ due to banks: on demand |
(654,869) | (478,177) |
| ƒ due to banks: other payables |
- | - |
| ƒ due to customers |
837,707 | 430,290 |
| ƒ securities issued |
(5) | (9,924) |
| ƒ #nancial liabilities held for trading |
- | - |
| ƒ #nancial liabilities designated at fair value through pro#t and loss |
- | - |
| ƒ other liabilities |
7,967 | 3,363 |
| Net cash \$ow from (used in) operating activities | (34,471) | 3,356 |
| B. INVESTMENT ACTIVITIES | ||
| 1. Cash \$ows from | - | 33 |
| ƒ sales of equity investments |
- | |
| ƒ dividends collected on equity investments |
- | 33 |
| ƒ sales/reimbursements of #nancial assets held to maturity |
- | - |
| ƒ sales of property and equipment |
- | - |
| ƒ sales of intangible assets |
- | - |
| ƒ purchases of subsidiaries and business lines |
- | - |
| 2. Cash \$ows used in | (89) | (2,677) |
| ƒ purchases of equity investments |
- | (2,377) |
| ƒ purchases of #nancial assets held to maturity |
- | - |
| ƒ purchases of property and equipment |
(71) | (248) |
| ƒ purchases of intangible assets |
(18) | (52) |
| ƒ purchases of subsidiaries and business lines |
- | - |
| Net cash \$ow from (used in) investment activities | (89) | (2,644) |
| C. FINANCING ACTIVITIES | ||
| ƒ issues/purchases of treasury shares |
36,551 | - |
| ƒ issues/purchases of equity instruments |
- | - |
| ƒ dividend distribution and other |
(1,972) | (704) |
| Net cash \$ow from (used in) "nancing activities | 34,579 | (704) |
| NET CASH FLOW GENERATED/USED DURING THE YEAR | 19 | 8 |
| Cash and cash equivalents at the beginning of the year 66 |
71 | |
|---|---|---|
| Total net cash &ow generated/used during the year 19 |
8 | |
| Cash and cash equivalents: effect of change in exchange rates | - | - |
| Cash and cash equivalents at balance sheet date 85 |
79 |
NOTES TO THE FINANCIAL STATEMENTS
This condensed, consolidated half-year report was drafted in accordance with Legislative Decree no. 38 of 28 February 2005, pursuant to the IAS/IFRS accounting standards issued by the International Accounting Standards Board (IASB) as authorised and in force on 30 June 2015, including the interpretation documents (SIC) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as established by EU Regulation no. 1606 of 19 July 2002. These standards were used to prepare the comparative data and opening balances as at 01 January 2015.
In preparing the condensed, consolidated half-year report, the Bank followed the instructions concerning #nancial statements issued by the Bank of Italy in its Regulation of 22 December 2005, the simultaneous Circular no. 262/05, the update of 22 December 2014 and the clari#cation notes, supplemented by the general provisions of the Italian Civil Code and other relevant legislative and regulatory provisions.
The condensed, consolidated half-year report was drafted in summary form and in accordance with IAS 34, with speci#c reference to the arrangements for disclosing #nancial information, supplemented by the other relevant legislative and regulatory standards.
The speci#c accounting standards adopted have been applied consistently with regard to the #nancial statements as at 31 December 2014.
There were no derogations to the application of the IAS/ IFRS accounting standards.
The condensed, consolidated half-year report was subject to a limited audit by KPMG S.p.A..
The condensed, consolidated half-year report comprises the Statement of #nancial position, Statement of pro#t and loss, Statement of other comprehensive income, Statement of changes in equity, Statement of cash &ows and Notes to the #nancial statements and is accompanied by a Directors' Report on management performance, the #nancial results achieved and the #nancial position of the Banca Sistema Group.
The #nancial statements, drawn up in accordance with the general guidelines laid down by the IAS, show the data for the period compared with the data from the previous #nancial year or corresponding period of the previous #nancial year as regards balance sheet and pro#t and loss #gures, respectively.
Pursuant to the provisions of art. 5 of Legislative Decree no. 38/2005, the #nancial statements use the Euro as the currency for accounting purposes. The amounts in the Accounting statements and Notes to the #nancial statements are expressed (unless expressly speci#ed) in thousands of Euro.
The #nancial statements were drafted in accordance with the speci#c accounting standards endorsed by the European Commission, as well as pursuant to the general assumptions laid down by the Framework for the preparation and presentation of #nancial statements issued by the IASB.
The Directors' Report and Notes to the #nancial statements provide the information required by international accounting standards, the Law and Bank of Italy, along with other non-mandatory information deemed equally necessary for giving a true and fair view of the consolidated position.
The condensed, consolidated half-year report includes Banca Sistema S.p.A. and the companies directly or indirectly controlled by or connected with it.
Compared with the situation as at 31 December 2014,
no changes to the scope of consolidation have been reported. The following statement shows the investments included within the scope of consolidation of the condensed, consolidated half-year report.
| INVESTMENT | |||||
|---|---|---|---|---|---|
| NAMES COMPANIES | REGISTERED OFFICE |
TYPE OF RELATIONSHIP (1) |
INVESTING COMPANY |
% HELD | % OF VOTES AVAILABLE (2) |
| Companies | |||||
| Companies subject to full consolidation | Banca | ||||
| 1 S.F. Trust Holdings Ltd | London | 1 | Sistema | 100% | 100% |
| Consolidated at equity | Banca | ||||
| 2 CS Union S.p.A. | Italy | 4 | Sistema | 25.80% | 25.80% |
Key:
(1) Type of relationship.
= majority of voting rights at the ordinary shareholders' meetings
= controlling in&uence
= joint control
(2) Available voting rights at ordinary shareholders' meeting, with separate indication of effective and potential rights
The Group's scope has not changed compared with the end of the previous year.
The investments in subsidiaries are consolidated using the full consolidation method. The concept of control goes beyond owning a majority of the percentage of stakes in the share capital of the subsidiary and is de#ned as the power of determining the managerial and #nancial policies of the said subsidiary to obtain bene#ts from its business.
Full consolidation provides for line-by-line aggregation of the balance sheet and pro#t and loss aggregates from the accounts of the subsidiaries. To this end, the following adjustments were made:
The results of the above adjustments, if positive, are shown - after allocation to the assets or liabilities of the subsidiary - as goodwill in item '130 Intangible Assets' on the date of initial consolidation. The resulting differences, if negative, are recognised in the statement
Associated companies are consolidated with the equity method.
The equity method provides for the initial recognition of the investment at cost and subsequent value adjustment based on the relevant share of the shareholders' equity of the subsidiary.
The differences between the value of the equity investment and the shareholders' equity of the relevant subsidiary are included in the accounting value of the subsidiary.
In the valuation of the relevant share, any potential
of pro#t and loss. Intra-group balances and transactions, including revenue, costs and dividends, are entirely eliminated. The #nancial results of a subsidiary acquired during the #nancial year are included in the consolidated #nancial statements from the date of acquisition. At the same time, the #nancial results of a transferred subsidiary are included in the consolidated #nancial statements up to the date on which the subsidiary is transferred.
The accounts used in the preparation of the consolidated #nancial statements are drafted on the same date. The consolidated #nancial statements were drafted using consistent accounting standards for transactions and similar events.
If a subsidiary uses accounting standards different from those adopted in the consolidated #nancial statements for transactions and events in similar circumstances, adjustments are made to the accounting position for consolidation purposes. Detailed information with reference to Art. 89 of Directive 2013/36/EU of the European Parliament and Council (CRD IV), are published at the link www.bancasistema.it/pillar3.
voting rights are not taken into consideration.
The relevant share of the annual results of the subsidiary is shown in a speci#c item of the consolidated of pro#t and loss.
If there is evidence that the value of an equity investment may be impaired, the recoverable value of said equity investment is estimated by considering the present value of future cash &ows that the investment could generate, including the #nal disposal value of the investment. Should the recovery value prove lower than the book value, the difference is recognised in the of pro#t and loss.
After the reference date of the condensed, consolidated half-year report, there were no events worthy of mention in the Notes to the #nancial statements which
would have had an impact on the statement of #nancial position and statement of pro#t and loss of the Bank or Group.
The accounting policies adopted for the drafting of the condensed consolidated half-year report, with reference to the classi#cation, recording, valuation and derecognition criteria for the various assets and liabilities, like the guidelines for recognising costs and revenues, have remained unchanged compared with those adopted in the annual and consolidated #nancial statements as at 31 December 2014, to which reference is made.
With reference to the condensed consolidated half-year report as at 30/06/2014, for the purposes of improving comparison, the amount of debt due to the National Interbank Deposit Guarantee Fund was reclassi#ed from other administrative costs to other charges.
There were no #nancial assets transferred between portfolios.
Qualitative information
There were no deviations from the valuation guidelines and techniques in use as at 31 December 2014.
The portfolio of #nancial instruments classi#ed at level 3 has no signi#cant impact on the Bank's #nancial statements.
The following fair value hierarchy was used in order to prepare the consolidated half-year report:
Nothing to report.
Nothing to report.
| Items/Values | 30.06.2015 | 31.12.2014 |
|---|---|---|
| a) Cash | 87 | 66 |
| b) Demand deposits with Central Banks | - | - |
| Total | 87 | 66 |
| 30.06.2015 | 31.12.2014 | |||||||
|---|---|---|---|---|---|---|---|---|
| Items/Values | Level 1 |
Level 2 |
Level 3 |
Level 1 |
Level 2 |
Level 3 |
||
| 1. Debt securities | 917,215 | - | - | 858,007 | - | - | ||
| 1.1 Structured securities | - | - | - | - | - | - | ||
| 1.2 Other debt securities | 917,215 | - | - | 858,007 | - | - | ||
| 2. Equities | - | - | - | - | - | - | ||
| 2.1 Measured at fair value | - | - | - | - | - | - | ||
| 2.2 Measured at cost | - | - | - | - | - | - | ||
| 3. Units of UCI | - | - | - | - | - | - | ||
| 4. Loans | - | - | - | - | - | - | ||
| TOTAL | 917,215 | - | - | 858,007 | - | - |
The Bank's securities portfolio is entirely composed of Italian government bonds with an average duration of about 9.3 months as at 30 June 2015 (the average duration at the end of 2014 was 8.5 months), in line with the Group's investment policies to keep securities with durations of less than 12 months.
Compared with year end, the nominal value of the
securities grew from € 860 to € 919 million.
Following market tensions in June caused by the 'Greek crisis', the fair value, as at 30 June, of the Italian government bonds in the portfolio was negative by € 1.3 million.
By mid-July, the prices of securities started to rise again, bringing the fair value to positive levels.
| 30.06.2015 | 31.12.2014 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Type of transactions/Values | BV | FV Level 1 |
FV Level 2 |
FV Level 3 |
BV | FV Level 1 |
FV Level 2 |
FV Level 3 |
|
| A. Due from Central Banks | 8,899 | 16,114 | |||||||
| 1. Term deposits | - | X | X | X | - | X | X | X | |
| 2. Compulsory reserve | 8,899 | X | X | X | 16,114 | X | X | X | |
| 3. Repurchase agreements | - | X | X | X | - | X | X | X | |
| 4. Other | - | X | X | X | - | X | X | X | |
| B. Due from banks | 37,114 | 568 | |||||||
| 1. Loans | 37,114 | X | 568 | ||||||
| 1.1 Current accounts and demand deposits | 551 | X | X | X | 568 | X | X | X | |
| 1.2. Term deposits | - | X | X | X | - | X | X | X | |
| 1.3. Other loans: | 36,563 | - | |||||||
| - Reverse repurchase agreements | - | X | X | X | - | X | X | X | |
| - Financial leases | - | X | X | X | - | X | X | X | |
| - Others | 36,563 | X | X | X | - | X | X | X | |
| 2. Debt securities | - | - | |||||||
| 2.1 Structured securities | - | X | X | X | - | X | X | X | |
| 2.2 Other debt securities | - | X | X | X | - | X | X | X | |
| TOTAL | 46,013 | - | - | 46,013 | 16,682 | - | - | 16,682 |
Key:
FV = fair value BV = book value
| 31.12.2014 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Book value | Fair value | Book value | Fair value | ||||||||||
| Type of transactions/Values | Performing | Purchased | Non-performing Other |
L1 | L2 | L3 | Performing | Purchased | Non-performing Other |
L1 | L2 | L3 | |
| Loans | 1,276,039 | 13,616 | 36,748 | 1,326,403 | 1,154,030 | 6,117 | 33,607 | 1,193,754 | |||||
| 1. Current accounts | 15,409 | - | x | x | x | 15,818 | - | 58 | x | x | x | ||
| 2. Reverse repurchase agreements | 334,554 | x | x | x | 290,316 | - | - | x | x | x | |||
| 3. Mortgages | 57,565 | 2,307 | x | x | x | 18,357 | - | 307 | x | x | x | ||
| 4. Credit cards, personal loans and salary-backed loans |
63,597 | 2,091 | x | x | x | 13,485 | - | - | x | x | x | ||
| 5. Financial leases | x | x | x | - | - | - | x | x | x | ||||
| 6. Factoring | 713,614 | 13,616 | 32,345 | x | x | x | 812,498 | 6,117 | 33,242 | x | x | x | |
| 7. Other loans | 91,300 | 5 | x | x | x | 3,556 | - | - | x | x | x | ||
| Debt securities | - | - | - | ||||||||||
| 8. Structured securities | x | x | x | - | - | - | x | x | x | ||||
| 9. Other debt securities | x | x | x | - | - | - | x | x | x | ||||
| TOTAL (book value) | 1,276,039 | 13,616 | 36,748 | - | - | 1,326,403 | 1,154,030 | 6,117 | 33,607 | - | - | 1,193,754 |
| Type of exposures/Values | GROSS EXPOSURE |
INDIVIDUAL ADJUSTMENTS |
COLLECTIVE ADJUSTMENTS |
NET EXPOSURE |
|---|---|---|---|---|
| A. ON-BALANCE SHEET EXPOSURES | ||||
| a) Bad loans | 22,266 | 4,198 | 18,068 | |
| b) Probable defaults | 11,278 | 280 | 10,998 | |
| c) Non-performing past due exposures | 21,385 | 88 | 21,297 | |
| d) Other assets | 2,196,684 | 2,455 | 2,194,229 | |
| TOTAL A | 2,251,613 | 4,566 | 2,455 | 2,244,592 |
| B. OFF-BALANCE SHEET EXPOSURES | ||||
| a) Non-performing | ||||
| b) Other | 671 | 671 | ||
| 671 | 671 |
The impact of net non-performing loans on the total outstanding portfolio is low and amounts to 5%.
The increase in bad loans compared with 31 December 2014 is physiological, related to the Bank's business. The Bad loans ratio (calculated as the ratio of net bad loans to the total of loans to customers, net of reverse REPO) changed from 1.01% as at 31 December 2014 to 1.82% as at 30 June 2015, even though it remained at reasonable levels.
| Assets/Values | 30.06.2015 | 31.12.2014 |
|---|---|---|
| A. INITIAL AMOUNT | 2,448 | - |
| B. INCREASES | 148 | 2,448 |
| B.1 Purchases | 2,377 | |
| B.2 Write-backs | ||
| B.3 Revaluations | ||
| B.4 Other changes | 148 | 71 |
| C. DECREASES | - | - |
| C.1 Sales | - | |
| C.2 Impairment losses | - | |
| C.3 Other changes | - | |
| D. FINAL AMOUNT | 2,596 | 2,448 |
| E. TOTAL REVALUATIONS | - | |
| F. TOTAL IMPAIRMENT LOSSES | - |
Equity investments include the Bank's equity stake of 25.80% in CS Union S.p.A. (a company created from the merger between the companies Candia S.p.A. and St.Ing. S.p.A.), operating on the bad #nancial and commercial loans management market, as well as in the management and recovery of receivables between individuals.
The increase of € 148 thousand represents the pro-quota result for the period.
| PROPERTY AND EQUIPMENT - ITEM 120 | |||
|---|---|---|---|
| Assets/Values | 30.06.2015 | 31.12.2014 |
|---|---|---|
| 1.1. PROPERTY AND EQUIPMENT OWNED | 1,149 | 1,201 |
| a) land | - | - |
| b) buildings | - | - |
| c) furniture | 309 | 309 |
| d) electronic equipment | 730 | 873 |
| e) other | 110 | 19 |
| 1.2. PROPERTY AND EQUIPMENT ACQUIRED UNDER FINANCE LEASE | - | |
| a) land | - | - |
| b) buildings | - | - |
| c) furniture | - | - |
| d) electronic equipment | - | - |
| e) other | - | - |
| TOTAL | 1,149 | 1,201 |
| 30.06.2015 | 31.12.2014 | |||
|---|---|---|---|---|
| Assets/Values | FINITE USEFUL LIFE |
INDEFINITE USEFUL LIFE |
FINITE USEFUL LIFE |
INDEFINITE USEFUL LIFE |
| A.1 GOODWILL | 1,786 | 1,786 | ||
| A.2 OTHER INTANGIBLE ASSETS | 105 | - | 118 | - |
| A.2.1 Assets measured at cost | 105 | - | 118 | - |
| a) Internally generated intangible assets | - | - | - | |
| b) Other assets | 105 | - | 118 | - |
| A.2.2 Assets measured at fair value | - | - | - | - |
| a) Internally generated intangible assets | - | - | - | - |
| b) Other assets | - | - | - | - |
| TOTAL | 105 | 1,786 | 118 | 1,786 |
| 30.06.2015 | 31.12.2014 | ||
|---|---|---|---|
| Tax advances | 3,984 | 2,484 | |
| Other | 1,884 | 561 | |
| Prepayments not attributable to a speci#c item | 1,326 | 166 | |
| Items under processing | 1,210 | 253 | |
| Leasehold improvements | 698 | 825 | |
| Accrued income not attributable to a speci#c item | 144 | 21 | |
| Security deposits | 69 | 66 | |
| TOTAL | 9,315 | 4,376 |
Other assets include amounts being processed after the end of the reference period and trade invoices to be issued and mainly attributable to collection. The item is physiological and the increase compared with the previous #nancial year is mainly linked to a receivable relating to a deposit totalling € 1.5 million made in order to participate in the acquisition of a tax credit arising from an insolvency procedure and an equal increase of € 1.5 million in advances paid for interest withholding tax.
| Type of transactions/Values | 30.06.2015 | 31.12.2014 | |
|---|---|---|---|
| 1. Due to Central banks | 35,000 | 730,020 | |
| 2. Due to banks | 131,535 | 91,384 | |
| 2.1 Current accounts and demand deposits | 10,485 | 36,366 | |
| 2.2 Term deposits | 121,050 | 55,018 | |
| 2.3 Loans | - | - | |
| 2.3.1 Repurchase agreements | - | - | |
| 2.3.2 Other | - | - | |
| 2.4 Debts for commitments to repurchase own equity instruments | - | - | |
| 2.5 Other payables | - | - | |
| TOTAL | 166,535 | 821,404 | |
| Fair value - Level 1 | - | - | |
| Fair value - Level 2 | - | - | |
| Fair value - Level 3 | 166,535 | 821,404 | |
| Fair value | 166,535 | 821,404 |
| Type of transactions/Values | 30.06.2015 | 31.12.2014 | |
|---|---|---|---|
| 1. Current accounts and demand deposits | 309,515 | 311,751 | |
| 2. Term deposits | 560,195 | 569,410 | |
| 3. Loans | 1,093,368 | 238,807 | |
| 3.1 Repurchase agreements | 1,093,342 | 238,807 | |
| 3.2 Other | 26 | ||
| 4. Debts for commitments to repurchase own equity instruments | - | ||
| 5. Other payables | 28,426 | 33,829 | |
| TOTAL | 1,991,504 | 1,153,797 | |
| Fair value - Level 1 | - | - | |
| Fair value - Level 2 | - | - | |
| Fair value - Level 3 | 1,991,504 | 1,153,797 | |
| Fair value | 1,991,504 | 1,153,797 |
| 30.06.2015 | 31.12.2014 | |||||||
|---|---|---|---|---|---|---|---|---|
| Type of securities/Values | Fair value | Fair value | ||||||
| Book value |
Level 1 | Level 2 | Level 3 | Book value |
Level 1 | Level 2 | Level 3 | |
| A. SECURITIES | ||||||||
| 1. Bonds | 20,104 | 20,104 | 20,109 | 20,109 | ||||
| 1.1 structured | ||||||||
| 1.2 other | 20,104 | 20,104 | 20,109 | 20,109 | ||||
| 2. Other securities | ||||||||
| 2.1 structured | ||||||||
| 2.2 other | ||||||||
| TOTAL | 20,104 | 20,104 | 20,109 | 20,109 |
| ISSUER | TYPE OF ISSUE | COUPON | MATURITY DATE |
NOMINAL VALUE |
IAS VALUE |
|
|---|---|---|---|---|---|---|
| Tier 1 capital | Banca Sistema S.p.A. |
Innovative equity instruments: mixed rate ISIN IT0004881444 |
Until June 2023, rate #xed at 7% From June 2023, &oating rate 6-month Euribor + 5.5% |
Perpetual | 8,000 | 8,014 |
| Tier 2 capital | Banca Sistema S.p.A. |
Subordinate ordinary loans (Lower Tier 2): ISIN IT0004869712 |
6-month Euribor + 5.5% | 15.11.2022 | 12,000 | 12,090 |
| TOTALE | 20,000 | 20,104 |
| 30.06.2015 | 31.12.2014 | ||
|---|---|---|---|
| Items under processing | 19,440 | 16,939 | |
| Tax payables to the Revenue Agency and other tax authorities | 11,280 | 11,524 | |
| Due to employees | 6,527 | 2,004 | |
| Accrued liabilities | 5,414 | 3,448 | |
| Trade payables | 2,447 | 2,068 | |
| Pension repayments | 332 | 437 | |
| Other | 33 | 21 | |
| TOTAL | 45,473 | 36,441 |
"Other liabilities" mainly include payments received after the end of the period by the assigned debtors and which were still being assigned and items being processed during the days following period-end, as well as trade payables and tax liabilities.
| EMPLOYEE TERMINATION INDEMNITIES − ITEM 110 |
|---|
| --------------------------------------------- |
| 30.06.2015 | 31.12.2014 | |
|---|---|---|
| A. INITIAL AMOUNT | 1,173 | 732 |
| B. INCREASES | 275 | 569 |
| B.1 Allowance of the year | 264 | 379 |
| B.2 Other changes | 11 | 190 |
| C. DECREASES | 84 | 128 |
| C.1 Bene#ts paid | 15 | 21 |
| C.2 Other changes | 69 | 107 |
| D. FINAL AMOUNT | 1,364 | 1,173 |
| TOTAL 1,364 |
1,173 |
The increase in "Other changes" refers to the actuarial adjustment amount accounted for as at 30/06/2015. The decrease in "Other changes" refers to the portions of the provision for employee termination indemnities accrued as at 30/06/2015 and paid to other supplementary pension funds.
The actuarial adjustment of employee termination indemnities was conducted as a closed group, based on "accrued bene#ts" through the "Projected Unit Credit" (PUC) criterion, as stipulated in paragraphs 64-66 of IAS 19.
The technical valuations were conducted on the basis of the assumptions described in the following table:
| Annual discount rate | 2.06% |
|---|---|
| Annual in&ation rate | 0.60% for 2015 |
| 1.20% for 2016 | |
| 1.50% 2017 and 2018 | |
| 2.00% from 2019 onwards | |
| Annual real salary increase rate | 1.00% |
| Annual employee termination indemnities increase rate | 1.950% for 2015 |
| 2.400% for 2016 | |
| 2.625% 2017 and 2018 | |
| 3.000% from 2019 onwards |
The discount rate used for determining the present value of the obligation was calculated, pursuant to paragraph 83 of IAS 19, from the Iboxx Corporate AA index with 10+ duration during the valuation month. To this end, a choice was made to select the yield with a duration comparable to the duration of the set of workers subject to valuation.
| Items/Values | 30.06.2015 | 31.12.2014 |
|---|---|---|
| 1. Provision for pensions | - | - |
| 2. Other provisions for risks and charges | 384 | 1,030 |
| 2.1 Legal disputes | - | - |
| 2.2 Personnel charges | 5 | 661 |
| 2.3 Other | 379 | 369 |
| TOTAL 384 |
1,030 |
| PROVISION FOR PENSIONS |
OTHER PROVISIONS |
TOTAL | |
|---|---|---|---|
| A. INITIAL AMOUNT | - | 1,030 | 1,030 |
| B. INCREASES | - | 310 | 310 |
| B.1 Allowance of the year | - | 310 | 310 |
| B.2 Time value changes | - | - | - |
| B.3 Changes due to discount rate changes | - | - | - |
| B.4 Other changes | - | - | - |
| C. DECREASES | - | 956 | 956 |
| C.1 Uses in the year | - | 956 | 956 |
| C.2 Changes due to discount rate changes | - | - | - |
| C.3 Other changes | - | - | - |
| D. FINAL AMOUNT | - | 384 | 384 |
The main changes in the provision for risks and charges were as follows:
The share capital of the Parent Company as at 30 June 2015 was entirely composed of 70,421,052 ordinary shares of a nominal value of € 0.12.
Since 02 July 2015, following the placement of new shares, the share capital is composed of 80,421,052 ordinary shares.
The Group does not hold treasury shares, neither of the parent company nor of its subsidiaries.
The following shows the Group's shareholder's equity:
| Items/Values | AMOUNT 30.06.2015 |
AMOUNT 31.12.2014 |
|
|---|---|---|---|
| 1. Share capital | 8,451 | 8,451 | |
| 2. Share premium reserve | 4,325 | 4,325 | |
| 3. Reserves | 62,771 | 8,734 | |
| 4. (Treasury shares) | - | - | |
| 5. Valuation reserves | (872) | 2 | |
| 6. Equity instruments | - | - | |
| 7. Pro#t (loss) for the period | 8,616 | 19,539 | |
| TOTAL | 83,291 | 41,051 |
For changes in reserves, please refer to the statement of changes in shareholders' equity.
| Items / Technical forms | Debt securities |
Loans | Other transactions |
30.06.2015 | 30.06.2014 |
|---|---|---|---|---|---|
| 1. Financial assets held for trading | - | - | - | - | - |
| 2. Financial assets available for sale | 616 | - | - | 616 | 2,228 |
| 3. Financial assets held to maturity | - | - | - | - | - |
| 4. Due from banks | - | 2,273 | - | 2,273 | 40 |
| 5. Loans to customers | - | 37,611 | - | 37,611 | 35,836 |
| 6. Financial assets designated at fair value | |||||
| through pro#t and loss | - | - | - | - | - |
| 7. Hedging derivatives | - | - | - | - | - |
| 8. Other assets | - | - | - | - | - |
| TOTAL | 616 | 39,884 | - | 40,500 | 38,104 |
| Items / Technical forms | Payables | Securities | Other transactions |
30.06.2014 | 30.06.2013 |
|---|---|---|---|---|---|
| 1. Due to Central banks | 68 | - | - | 68 | 706 |
| 2. Due to banks | 430 | - | - | 430 | 399 |
| 3. Due to customers | 10,435 | - | - | 10,435 | 11,955 |
| 4. Securities issued | - | 616 | - | 616 | 987 |
| 5. Financial liabilities held for trading | - | - | - | - | - |
| 6. Financial liabilities designated at fair value | |||||
| through pro#t and loss | - | - | - | - | - |
| 7. Other liabilities and provisions | - | - | - | - | - |
| 8. Hedging derivatives | - | - | - | - | - |
| TOTALE | 10,933 | 616 | - | 11,549 | 14,047 |
| Type of services/Values | 30.06.2015 | 30.06.2014 |
|---|---|---|
| A) Guarantees given | 3 | - |
| B) Credit derivatives | - | - |
| C) Management, dealing and consultancy services: | 204 | 227 |
| 1. Trading in #nancial instruments | - | 2 |
| 2. Currency trading | - | - |
| 3. Portfolio management | - | - |
| 3.1. Individual | - | - |
| 3.2. Collective | - | - |
| 4. Custody and administration of securities | - | 3 |
| 5. Depositary bank | - | - |
| 6. Placement of securities | 7 | 4 |
| 7. Income from reception and transmission of orders | 21 | 30 |
| 8. Consultancy services | - | - |
| 8.1. On investments | - | - |
| 8.2. On #nancial structure | - | - |
| 9. Distribution of third party services | 176 | 188 |
| 9.1. Portfolio management | - | - |
| 9.1.1. individual | - | - |
| 9.1.2. collective | - | - |
| 9.2. Insurance products | 176 | 188 |
| 9.3. Other products | - | - |
| D) Collection and payment services | 19 | 4 |
| E) Servicing related to securitisations | - | 56 |
| F) Services related to factoring | 5,834 | 5,078 |
| G) Tax collection services | - | - |
| H) Management of multilateral trading facilities | - | - |
| I) Management of current accounts | 37 | 35 |
| J) Other services | 569 | 591 |
| TOTALE | 6,666 | 5,991 |
| Services/Values | 30.06.2015 | 30.06.2014 |
|---|---|---|
| A) Guarantees received | - | - |
| B) Credit derivatives | 63 | - |
| C) Management, dealing and consultancy services: | 164 | 94 |
| 1. Trading in #nancial instruments | 73 | 9 |
| 2. Currency trading | - | - |
| 3. Portfolio management | - | - |
| 3.1 Own portfolio | - | - |
| 3.2 Third party portfolios | - | - |
| 4. Custody and administration of securities | - | - |
| 5. Placement of #nancial instruments | 91 | - |
| 6. "Out-of-branch" sale of #nancial instruments, products and services | - | |
| D) Collection and payment services | 61 | 46 |
| E) Other services | 525 | 291 |
| TOTAL | 813 | 431 |
| PROFIT (LOSS) FROM DISPOSAL/REPURCHASE - ITEM 100 |
|---|
| --------------------------------------------------- |
| Items/Income components | 30.06.2015 | 30.06.2014 | ||||||
|---|---|---|---|---|---|---|---|---|
| Losses | Net pro#t (loss) |
Pro#ts | Losses | Net pro#t (loss) |
||||
| Financial assets | ||||||||
| 1. | Due from banks | - | - | - | - | - | - | |
| 2. | Loans to customers | - | - | - | - | - | - | |
| 3. | Financial assets available for sale | 2,088 | (137) | 1,951 | 3,143 | (348) | 2,759 | |
| 3.1 Debt securities | 2,088 | (137) | 1,951 | 3,143 | (348) | 2,759 | ||
| 3.2 Equities | - | - | - | - | ||||
| 3.3 Units of UCI | - | - | - | - | - | - | ||
| 3.4 Loans | - | - | - | - | - | - | ||
| 4. | Financial assets held to maturity | - | - | - | - | - | - | |
| Total assets | 2,088 | (137) | 1,951 | 3,143 | (348) | 2,759 | ||
| Financial liabilities | ||||||||
| 1. | Due to banks | - | - | - | - | - | - | |
| 2. | Due to customers | - | - | - | - | - | - | |
| 3. | Securities issued | - | - | - | - | |||
| Total liabilities | - | - | - | - | - | - |
| Impairment losses (1) | Write-backs (2) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Items/Income | Individual | Individual | Collective | ||||||
| components | Write-offs | Other | Collective | A | A B | B | 30.06.2015 | 30.06.2014 | |
| A. DUE FROM BANKS: | - | - | - | - | - | - | - | - | - |
| - loans | - | - | - | - | - | - | - | - | - |
| - debt securities | - | - | - | - | - | - | - | - | - |
| B. LOANS TO CUSTOMERS: | - | (1,809) | (451) | 169 | - | - | - | (2,091) | (2,018) |
| Non-performing loans purchased | - | - | - | - | - | - | - | - | - |
| - loans | - | - | - | - | - | - | - | - | - |
| - debt securities | - | - | - | - | - | - | - | - | - |
| Other receivables | - | (1,809) | (451) | 169 | - | - | - | (2,091) | (2,018) |
| - loans | - | (1,809) | (451) | 169 | - | - | - | (2,091) | (2,018) |
| - debt securities | - | - | - | - | - | - | - | - | - |
| C. TOTAL | - | (1,809) | (451) | 169 | - | - | - | (2,091) | (2,018) |
Key:
A = from interest
B = other
| Type of expenditure / Values | 30.06.2015 | 30.06.2014 |
|---|---|---|
| 1) Employees | 10,585 | 5,601 |
| A) Wages and salaries | 4,092 | 3,163 |
| B) Social security charges | 941 | 732 |
| C) Termination indemnities | - | - |
| D) Supplementary bene#ts | - | - |
| E) Allowance to the provision for employee termination indemnities | 210 | 289 |
| F) Allowance to the provision for pensions and similar obligations: | 107 | 112 |
| - De#ned contribution plans | 107 | 112 |
| - De#ned bene#t plans | - | - |
| G) Payments to external pension funds: | - | - |
| - De#ned contribution plans | - | - |
| - De#ned bene#t plans | - | - |
| H) Costs from share-based payments | - | - |
| I) Other bene#ts in favour of employees | 5,235 | 1,305 |
| 2) Other personnel | 35 | 68 |
| 3) Directors and statutory auditors | 266 | 265 |
| 4) Early retirement costs | - | - |
| 5) Recovery of expenses for employees of the bank seconded to other entities | - | |
| 6) Reimbursement of expenses for employees of other entities seconded to the bank | 31 | 49 |
| TOTAL | 10,917 | 5,983 |
| Type of expenditure / Values | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Servicing and collection activities | 3,329 | 3,391 |
| Consultancy | 3,027 | 997 |
| Computer expenses | 1,468 | 1,481 |
| Rent and related fees | 794 | 715 |
| Indirect taxes and duties | 735 | 646 |
| Advertising | 369 | 412 |
| Auditing fees | 123 | 183 |
| Other | 177 | 181 |
| Car hire and related fees | 291 | 232 |
| Legal and notary expenses | 269 | 158 |
| Expense reimbursement and entertainment | 225 | 196 |
| Membership fees | 127 | 135 |
| Infoprovider expenses | 140 | 110 |
| Maintenance of movables and real properties | 90 | 115 |
| Telephone and postage expenses | 87 | 74 |
| Discretionary payments | 9 | 4 |
| TOTAL | 11,260 | 9,030 |
| Item / Values | 30.06.2014 | |
|---|---|---|
| Current taxes (-) | (4,154) | (5,968) |
| Changes in current taxes of previous years (+/-) | - | - |
| Reduction in current taxes of the year (+) | - | - |
| Reduction in current taxes of the year for tax credits pursuant | ||
| to Law no. 214/2011 (+) | - | - |
| Changes in deferred tax assets (+/-) | (11) | 560 |
| Changes in deferred tax liabilities (+/-) | - | - |
| Income tax for the year (-) (-1+/-2+3+/-4+/-5) | (4,165) | (5,408) |
OWN FUNDS AND CAPITAL RATIOS
Quantitative information
| 30.06.2015 | |
|---|---|
| A. COMMON EQUITY TIER 1 (CET1) BEFORE APPLICATION | |
| OF PRUDENTIAL FILTERS | 83,070 |
| of which CET 1 instruments subject to transitional provisions | 860 |
| B. CET1 PRUDENTIAL FILTERS (+/-) | - |
| C. CET1 gross of elements to be deducted and of the effects of the transitional | |
| provisions (A+/-B) | 83,070 |
| D. ITEMS TO BE DEDUCTED FROM CET1 | (1,891) |
| E. TRANSITIONAL PROVISIONS - IMPACT ON CET (+/-) | 860 |
| F. TOTAL COMMON EQUITY TIER 1 (CET1) (C-D+/-E) | 82,038 |
| G. ADDITIONAL TIER1 (AT1) GROSS OF ELEMENTS TO BE DEDUCTED | |
| AND THE EFFECTS OF THE TRANSITIONAL PROVISIONS | 8,000 |
| of which AT1 instruments subject to transitional provisions | - |
| H. ITEMS TO BE DEDUCTED FROM AT1 | - |
| I. TRANSITIONAL PROVISIONS - IMPACT ON AT1 (+/-) | - |
| L. TOTAL ADDITIONAL TIER 1 (AT1) (G-H+/-I) | 8,000 |
| M. TIER2 (T2) GROSS OF ELEMENTS TO BE DEDUCTED AND THE EFFECTS | |
| OF THE TRANSITIONAL PROVISIONS | 12,000 |
| di cui strumenti di T2 oggetto di disposizioni transitorie | - |
| N. ITEMS TO BE DEDUCTED FROM T2 | - |
| O. TRANSITIONAL PROVISIONS - IMPACT ON T2 (+/-) | - |
| P. TOTAL TIER 2 (T2) (M-N+/-O) | 12,000 |
| Q. TOTAL OWN FUNDS (F+L+P) | 102,038 |
| UNWEIGHTED AMOUNTS | WEIGHTED AMOUNTS/REQUIREMENTS |
|||
|---|---|---|---|---|
| Categories / Values | 30.06.2015 | 31.12.2014 | 30.06.2015 | 31.12.2014 |
| A. RISK ASSETS | ||||
| A.1 Credit and counterparty risk | 1,992,288 | 1,799,310 | 393,913 | 298,803 |
| 1. Standardised approach | 1,992,288 | 1,799,310 | 393,913 | 298,803 |
| 2. Internal ratings based approach | - | - | - | - |
| 2.1 Basic | - | - | - | - |
| 2.2 Advanced | - | - | - | - |
| 3. Securitisations | - | - | - | - |
| B. CAPITAL REQUIREMENTS | ||||
| B.1 Credit and counterparty risk | 31,513 | 23,904 | ||
| B.2 Credit assessment adjustment risk | 0 | 1 | ||
| B.3 Settlement risk | 0 | 0 | ||
| B.2 Market risk | 0 | 0 | ||
| 1. Standard approach | 0 | 0 | ||
| 2. Internal models | 0 | 0 | ||
| 3. Concentration risk | 0 | 0 | ||
| B.5 Operational risk | 5,196 | 5,196 | ||
| 1. Basic indicator approach | 5,196 | 5,196 | ||
| 2. Standardised approach | - | - | ||
| 3. Advanced measurement approach | - | - | ||
| B.6 Other calculation elements | 0 | 0 | ||
| B.7 Total capital requirements | 36,710 | 29,102 | ||
| C. RISK ASSETS AND CAPITAL RATIOS | 458,869 | 363,771 | ||
| C.1 Risk-weighted assets | 458,869 | 363,771 | ||
| C.2 CET1 capital/risk-weighted assets (CET1 capital ratio) | 17,88% | 10,40% | ||
| C.3 Tier1 capital/risk-weighted assets (Tier 1 capital ratio) | 19,62% | 12,60% | ||
| C.4 Total own funds/risk-weighted assets (Total Capital Ratio) | 22,24% | 15,90% |
Large risks
As at 30 June 2015, the Parent Company's major risks are as follows:
a) Exposure Value = 2,781,109.343
b) Weighted Value (Value of the exposure after CRM and exemptions pursuant to art. 400 of CRR) = 123,114,472
c) No. positions 19.
Transactions with related parties and connected parties, including the relative authorisation and disclosure procedures, are governed by the "Procedure governing transactions with associated parties" approved by the Board of Directors and published on the Internet site of the Parent Company, Banca Sistema S.p.A.
Transactions between the Group companies and related parties or connected parties were carried out in the interests of the Company, including within the scope of ordinary operations; these transactions were carried out in accordance with market conditions and, in any event, on the basis of mutual #nancial advantage and in compliance with all procedures.
With respect to transactions with parties who exercise administration, management and control functions in accordance with article 136 of the Consolidated Law on
The following data show the compensation of key managers, as per IAS 24 and Bank of Italy Circular no. 262 of 22 Banking, they are included in the Executive Committee decision, speci#cally authorised by the Board of Directors and with the approval of the Statutory auditors, subject to compliance with the obligations provided under the Civil Code with respect to matters relating to the con&ict of interest of directors.
Pursuant to IAS 24, the related parties for Banca Sistema include:
December 2005 as subsequently updated, which requires the inclusion of the members of the Board of Statutory Auditors.
| Values in thousands of Euro | BOARD OF DIRECTORS |
BOARD OF STATUTORY AUDITORS |
OTHER KEY MANAGERS |
1ST QUARTER OF 2015 |
1ST QUARTER OF 2014 |
|---|---|---|---|---|---|
| Values in thousands of Euro | 235 | 54 | 1,710 | 1,999 | 1,733 |
| Short-term bene#ts for employees | - | - | - | - | - |
| Post-employment bene#ts | - | - | - | - | - |
| Other long-term bene#ts | - | - | - | - | |
| Termination bene#ts | |||||
| Share-based payment | - | - | - | - | - |
| Total | 235 | 54 | 1,710 | 1,999 | 1,733 |
The following table shows the assets, liabilities, guarantees and commitments as at 30 June 2015, differentiated by type of related party with an indication of the impact on each individual caption.
| Values in thousands of Euro | SUBSIDIARIES | DIRECTORS, BOARD OF STATUTORY AUDITORS AND KEY MANAGERS |
OTHER RELATED PARTIES |
% OF CAPTION |
|---|---|---|---|---|
| Loans to customers | 9,162 | 1,353 | 28 | 0.79% |
| Due to customers | 71 | 408 | 21,484 | 1.10% |
| Securities issued | - | - | 20,104 | 100.00% |
| Other liabilities | 393 | - | - | 0.86% |
The following table indicates the costs and income for the #rst half of 2015, differentiated by type of related party.
| Values in thousands of Euro | SUBSIDIARIES | DIRECTORS, BOARD OF STATUTORY AUDITORS AND KEY MANAGERS |
OTHER RELATED PARTIES |
% OF CAPTION |
|---|---|---|---|---|
| Interest income | 310 | 9 | - | 0.79% |
| Interest expenses | - | 795 | 6.88% | |
| Other administrative expenses | 349 | - | - | 3.10% |
The following table sets forth the details of each related party.
| Values in thousands of Euro | ASSETS | LIABILITIES | COSTS | REVENUES |
|---|---|---|---|---|
| SF Trust Holding Ltd. | 975 | 393 | 343 | 19 |
| CS Union S.p.A. | 8,186 | 71 | 6 | 291 |
| Shareholders - SGBS | - | 24 | - | - |
| Shareholders - Sof Luxco | - | 1,752 | 7 | - |
| Shareholders - Fondazione Pisa | 20,104 | 18,789 | 781 | - |
| Shareholders - Fondazione CR Alessandria | - | 185 | 2 | - |
| Shareholders - Fondazione Sicilia | - | 276 | 1 | - |
| 29,265 | 21,490 | 1,140 | 310 |
For the purposes of segment reporting as per IFRS 8, the statement of pro#t and loss is broken down by segment as follows.
| Items | 30 JUNE 2015 | |||
|---|---|---|---|---|
| Values in thousands of Euro | FACTORING | BANKING | CORPORATE | CONSOLIDATED TOTAL |
| Interest margin | 26,463 | 1,479 | 1,009 | 28,951 |
| Net fee and commission income | 5,841 | 160 | (148) | 5,853 |
| Other costs/revenue | 2,060 | 2,060 | ||
| Operating income | 32,304 | 1,639 | 2,921 | 36,864 |
| Net value adjustments due to loan | ||||
| impairment | (1,061) | (1,030) | - | (2,091) |
| Net income from banking activities | 31,243 | 609 | 2,921 | 34,773 |
| Items | 30 JUNE 2015 | |||
|---|---|---|---|---|
| Values in thousands of Euro | FACTORING | BANKING | CORPORATE | CONSOLIDATED TOTAL |
| Financial assets | - | - | 917,215 | 917,215 |
| Due from banks | - | - | 46,013 | 46,013 |
| Due to banks | - | - | 166,535 | 166,535 |
| Loans to customers | 837,687 | 125,239 | 363,477 | 1,326,403 |
| Due to customers | 28,426 | - | 1,963,078 | 1,991,504 |
The Factoring division includes the business area related to the origination of trade and tax receivables with and without recourse. In addition, the division includes the business area related to the management and recovery of receivables on behalf of third parties.
The Banking segment includes the business area related to the origination of guaranteed loans to small and medium-sized enterprises, pension- and salary-backed loan portfolios and costs/income from assets under administration and the placement of third-party products. The Corporate segment includes activities related to the management of the Group's #nancial resources and costs/income in support of the business activities. Moreover, this segment includes all the consolidation entries, as well as all the inter-company cancellations.
The secondary disclosure by geographic area has been omitted as immaterial, since the customers are mainly concentrated in the domestic market.
The undersigned, Gianluca Garbi, in his capacity as CEO, and Margherita Mapelli, in her capacity as Designated manager responsible for drafting the company accounting documents of Banca Sistema S.p.A. hereby certify, having taken into account the provisions of art. 154-bis, paragraphs 3 and 4, of legislative decree no. 58 of 24 February 1998:
the suitability as regards the characteristics of the company, and
the effective implementation of the administrative and accounting procedures for the drafting of the condensed, consolidated half-year #nancial report, during the #rst half of 2015.
The Designated manager was appointed by resolution of the Board of Directors with effect from 02 July 2015, and since then has ful#lled her duties and acquired the necessary powers for the execution of the veri#cation activities prescribed by the law. A project geared towards the implementation of the instruments to be used for the execution of the periodic checks by the Designated manager on a structured and continuous basis, in line with the provisions of the generally accepted international reference standards for the internal control system is currently being #nalised. 3. Moreover, the undersigned hereby certify that:
3.1 the condensed, consolidated half-year #nancial report a) was drafted in accordance with the applicable international accounting standards endorsed by the European Community, pursuant to regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July 2002; b) corresponds to the results of the accounting books and records;
c) is suitable for providing a true and fair view of the #nancial position of the issuer and all the companies included in the scope of consolidation.
3.2 The interim directors' report includes a reliable analysis of the important events which occurred during the #rst half of the year and their impact on the consolidated condensed half-year #nancial report, together with a description of the main risks and uncertainties for the remaining six months of the year. The interim directors' report includes, moreover, a reliable analysis of the information concerning major transactions with related parties.
Milan, 30 July 2015
Gianluca Garbi
CEO
Margherita Mapelli
Designated manager responsible for drafting the company accounting documents
-86-
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