Banca Ifis

Investor Presentation • Jan 14, 2020

Business Plan 2020-2022

14 January 2020

Table of contents

1		Mission and track record
2	Strategic guidelines and financial targets
	2.0	Strategic highlights
	2.1	Financial targets
	2.2	Conclusions
3		Appendix
	3.1	NPL business
	3.2	Commercial and Corporate Banking
	3.3	Enhancing operating machine
	3.4	Segment reporting
	3.5	Definition of default & Calendar provisioning

Strategy and mission

Banking group leader in specialty finance, focused on market segments with high profitability, a "go-to" partner to SMEs with a dedicated service model and a full range of customized products with proven leadership in unsecured NPL

A unique and resilient business model

Creating sustainable earnings, self funding, growth while delivering attractive dividends

Banca IFIS: A diversified financial group

NPL Business* (51% of 2019 net income)*

• Pioneer in NPL management business in Italy (since 2011)
• Leader in unsecured NPL, growing in secured NPL
  • o Proprietary database with #1.2mln borrowers
  • o €24bn NPL under management
  • o ~450 employees
  • o €1bn cash recovery since inception

Commercial & Corporate banking* (46% of 2019 net income)**

• Large portfolio offer for SMEs
• ~26K SME clients, 55k self employed customers and ~100k Rendimax customers
• Specialization in factoring, leasing, structured finance
• All business units are profitable

• 4th player in factoring with~ 6% market share

Organic growth coupled with opportunistic acquisitions

**Non core and G&S represented ca. 3% of 2019 net income

^{* 2019} figures are purely indicative and are based on 2019 most recent projections

2019 estimate¹ : P&L pro forma break-down by business unit

Commercial & Corporate banking

Data in € mln	NPL	Factoring	Leasing	Corp Banking	Lending	Non & core G&S	Consolidated
Net banking income	244	166	53	20	5	69	557
-Of which PPA	-2			3		56	58
Loan loss provisions	0	-40	-11	-1	-1	-32	-85
Operating costs	-156	-85	-25	-3	-3	-40	-312
Extraordinary items	0	0	0	0	0	18	18
income (1) Net	62	29	15	12	1	4	123
Net income (%)	51%	24%	12%	10%	1%	3%	100%
Cost (bps) of credit	-	131	81	11	61	-	-
Cost / income (%)	64%	51%	47%	15%	49%	58%	56%
RWA (2)	2 050	2 875	1 469	698	212	1 122	8 426
Capital allocation (3)	225	315	161	77	23	123	924
Return on (4) capital allocated	28%	9%	9%	15%	5%	3%	13%

• Lending includes commercial medium long term lending in Italy and pharmacies
• Corporate banking includes structured finance, special situations and equity investments
• Non Core: former Interbanca performing and NPL portfolios. In 2019, its loan loss provisions were impacted by a 3 large positions of former Interbanca (total provisions of ca. €21mln)
• G&S: central services, treasury and costs not allocated to other business units. In 2019, extraordinary items includes €15mln from the closing of a tax proceeding of former Interbanca with no impact on Banca IFIS's net income

(2) RWA Credit risk only. It excludes RWA from operating, market risks and CVA (€1bn)

(3) RWA (Credit risk only) x CET1 2019 expected (4) Net income on capital allocation

Stable shareholders and governance

The Chairman S. Furstenberg

• S. Furstenberg is the founder and has been serving as Chairman since 1983. His vision encompasses:
  • o Long term value creation with a strategy focused on creating continuous adequate earnings, self funding superior growth and delivering attractive and steady dividends
  • o Forefront in business and digital innovation
  • o Prudent attitude towards risks but able seize industrial opportunities when they arise (i.e. acquisition of Interbanca, pioneering the NPL market)

La Scogliera – 50.4% of Banca IFIS

• La Scogliera provides, as main shareholder, continuity and cohesion in the management of Banca IFIS
• La Scogliera does not have any other material assets and liabilities other than Banca IFIS
• Under the current interpretation of the application of the 2013/36/EU (CRD IV) Directive and EU Regulation 575/2013 (CRR) La Scogliera consolidates Banca IFIS from a regulatory standpoint

Free float: 49.6%

Management team

CEO Luciano Colombini

3Y CEO Banca Finint, 9Y General Manager at BP Verona, Unipol Banca, Banco Desio, 13Y at BPV

Finance Mariacristina Taormina

4Yas CFO at Banca IFIS, 15Y Senior manager specialized in banking and financial institution at KPMG

Investor Relations & Corporate Development

Martino Da Rio

10Y investment banking at Lehman and Credit Suisse in Milan and London, 6Y Head of IR, real estate and M&A at MPS

Legal & Corporate Affairs Lucia Martinoli

20Y management in sales, ICT, compliance, coordination and Legal at BP Intra, Veneto Banca, Banca Intermobiliare e Intesa Sanpaolo New New

Risk Management Walter vecchiato

New

4Y Principal Bank Sector Regulatory Expert EBA, 2Y CRO Gruppo Cassa Centrale, previously several roles at leading Italian banks

Operations Emanuel Nalli

General Manager Alberto Staccione

5Y advisory Banca IFIS, 10Y in reorganization projects across financial services industry at KPMG Advisory

33Y General Manager, Factoring Manager and Business Manager at Banca IFIS

Capital Markets

Saverio Bonavita

10Y CFO Unipol Banca, 15Y asset management at Unicredit and Intesa Sanpaolo

NPL Transactions Riccardo Sigaudo

2Y Head of the Origination Team for IFIS NPL, 10Y in the Corporate Finance & Strategy

Commercial Business Raffaele Zingone

7Y Business Development and Business Director, 7Y Head of Strategic Planning & Control at Banca IFIS

Strategic Planning Paolo Formigoni

7Y Deputy General Manager in retail banking, Head of Strategic Planning at Crèdit Agricole, 12Y management consulting, 3Y in US

Marketing & Communication Rosalba Benedetto

5Y external relations and comm director at Ilva, 8Y Head of Corporate Comm at Autogrill, 4Y comm consultant

NPL Workout & FBS General manager Francesco De Marco 8Y in Banca IFIS in many different positions. previously at KPMG and Mediobanca

Table of contents

1	Mission and track record
2	Strategic guidelines and financial targets
	2.1	Strategic highlights
	2.2	Financial targets
	2.3	Conclusions
3		Appendix
	3.1	NPL business
	3.2	Commercial and Corporate Banking
	3.3	Enhancing operating machine
	3.4	Segment reporting
	3.5	Definition of default & Calendar provisioning: deep dive

Strategic actions: highlights

NPL business: highlights

Action	Description	Impact	Expected results
1 Streamlining corporate structure	• Acquisition of FBS minority stakes • New corporate structure with 2 wholly owned specialized companies: o IFIS NPL Investing: NPL purchase o IFIS Servicing: NPL management • Potential acquisition of servicers / hiring professionals in specific NPL segments	• Speed up the full integration of FBS • Leveraging on complementary know how of Banca IFIS (unsecured retail) and FBS (secured & corporate) • Broaden purchasing to secured and unsecured NPL	2020-22 €8.5bn NPL
2 Continuing NPL purchasing	• Acquisition of unsecured and secured NPLs • Continuing active participation in all disposal processes	•In 2020-2022, purchase of €8.5bn GBV of NPLs (total investment of €0.8bn) •In 2022, Banca IFIS will manage €24.5bn own NPLs (+€9bn in servicing)	purchases 2020-22 €0.8bn
3 Capital light model (from 2023)	• From 2023 onwards, for NPL subject to calendar provisioning, become an asset manager with purchasing power capabilities	• Attract co-investors in NPL subject to calendar provisioning • Offer opportunity to invest in secured and unsecured NPLs in the form of equity and senior	Investments
4 Improving workout	• Improve judicial and extrajudicial workouts in unsecured and secured NPLs. Investing in digitalization and IT in NPL valuation, onboarding and monitoring (transform FTEs processes requiring ca. 25% of IFIS workforce)	• Streamlining timeframe of collection • Economy of scale

Proven experience in NPL recovery

NPL portfolios by year of purchase*

Actual cash repayments > expected cash repayments *

Judicial + non judicial recovery, data in €mln

Cash repayments > internal model estimates

• On average full cash recovery of the NPL price paid after ca. 4 years
• Average purchase prices slightly up as NPLs acquired in 2018-2019 present better quality in terms of documentations and vintage
• Actual cash repayment proved to be higher than expected cash recovery projected by internal models

No significant impact of calendar provisioning expected in 2020-22

Commercial & Corporate Banking: highlights

Action	Description	Impact	Expected results*
1 Focus on selective business and customer segments	• Focus on Mid Corporate segment, with a specific relationship model vs. model based on rating/processes • Commercial offering boost (i.e. Fast Finance, Green Business for leasing)	•Increase mid corporate clients •Improve cross selling •Increase customer retention	Net banking €51mln
2 Digital innovation	• Redesign and innovate commercial banking and go-to-market with new digital interaction channels • Online targeting specific businesses	• Growing factoring business • New commercial opportunities due to new digital platform; cost saving due to back office automation	income ('19-'22) Customer loans €6.9bn '22
3 Credit risk management	• Evolution of internal risk processes to ensure an improved, automated and fully integrated risk management • New team focused on high-risk sectors, new early warning, new forward looking approach	• Disciplined organization • Maintain a high quality portfolio • Cost of risk reduction • Reduction of concentration risk • Strengthen credit underwriting, monitoring and management	Group (consolidated) cost of credit** 120 bps 75 bps 2019 2022
4 New communica tion and brand strategy	• Review brand identity and communication strategy •Innovate marketing coverage	• Facilitating commercial efforts • Consolidating digital channels in website that can act a "unique point of entry" to the Group on the web

* 2019 figures are purely indicative and are based on 2019 most recent projections

** Group cost of credit expected to decrease from 120bps in 2019 to 75bps in 2022. Cost of credit of commercial & corporate banking unit expected to decrease from 101bps in 2019 to 83bps in 2022

Focus on cost of credit

** excludes NPL business

2.1

^{* 2019} figures are purely indicative and are based on 2019 most recent projections

Enhancing operating machine: highlights

Action	Description	Impact	Expected results*
1 Cost efficiency	• Rationalization of IT expenses	• Full concentration of procurement for overhead costs	Cost/income (%) 55.9 52.1
	• Focus on investments related with strategic priorities	• Consolidate relationships with info providers and suppliers	2019 pro forma 2022
2 Streamlining real estate portfolio	• Streamlining group headquarters	• Disposal of the building on C. Venezia in Milan (capital gain of +€25mln, annual cost saving €1.5mln). Building a new RE in Mestre (2022 delivery)
3 Simplification of organizational structure	• Simplification of organizational structure	• Reduction of direct reporting to CEO and GM • Strengthening management team
4 RWA	• RWA optimization	• Transformation of NPLs in forbearances according to certain conditions • Lower RWA on Fast Finance bank	Lower RWA -€0.4bn
optimization		guarantees provided to the PA • Acquisition of rating for specific customers	CET1 (bps) +40bps
5 Funding strategy	• Funding mix diversification	• TLTRO, bond issue, foreign deposits, retail funding reduction	Cost of funding 1.4% 1.2% 2019 2022

* 2019 figures are purely indicative and are based on 2019 most recent projections

Prudent macroeconomic assumptions

Moving towards sustainable earnings

Core business shows a resilient underlying net profit

Solid and realistic targets

* 2019 figures are purely indicative and are based on 2019 most recent projections

** Cost of credit excluding NPL business

*** Excludes extraordinary items

CET1* Evolution

Management actions, prudently not included in the Industrial Plan, that can provide ca. 40bps of further increase in CET1

• ✓ Transformation of court orders from NPLs into performing, according to certain conditions to be agreed with Regulator. The borrower is paying Banca IFIS on the basis of a judicial recovery plan
• ✓ Lower RWA on bank guarantees to be provided to the Public Administration in the context of the acquisition of fiscal credits in bankruptcy procedures (to be agreed with Regulator)
• ✓ Acquire rating from External Credit Assessment Institutions ("ECAI") for SME/Corporate clients to lower RWA

18 *The application of the 2013/36/EU (CRD IV) Directive and EU Regulation 575/2013 (CRR) envisages that only 50.4% of the excess capital of Banca IFIS Group Scope is included in the CET1 of La Scogliera Group Scope

** SREP received by the Bank of Italy in January 2019, to be applied in 2019

***Includes change in minorities booked in CET1, change in reserves and intangible assets, differences between 2020-22 net incomes and dividends at Banca IFIS consolidation scope and at La Scogliera consolidation scope

Customer loans

* 2019 figures are purely indicative and are based on 2019 most recent projections

Funding

Diversify funding mix, monitoring liquidity and cost of funding

• Continue retail funding through Rendimax
• Increasing short term corporate funding
• Non Italian retail funding through international platform
• New bond issue up to €1bn (EMTN program)
• Use of TLTRO III up to €1.5bn
• Disposal of senior notes as part of NPL securitization (starting from 2023)

* 2019 figures are purely indicative and are based on 2019 most recent projections

Asset quality: evolution

* 2019 figures are purely indicative and are based on 2019 most recent projections

Strengthening credit risk management

• New credit department to evaluate exposures above a certain threshold • New credit policy in order to reduce counterparty and business sector concentration risk • Credit information and process improvement in order to streamline early warning and detection, monitoring and data analysis • Strengthening credit management in order to promptly address new NPEs and improve cure rate • Reducing factoring "technical" past due (i.e. positions in past because of technical factors, not representing asset quality risks) Management actions • Disposal of ca. €27mln NPLs (net book value as at 31 Dec 2020) of former Interbanca, already identified and worked out by Banca IFIS
  • Disposal of ca. 27mln (net book value as at 31 Dec 2021) of former Interbanca mortgages and some factoring NPLs
  • Potential disposal of factoring NPLs from 2021 onwards
  • UTP disposal
  • Write offs of NPLs already fully provisioned

NPL

disposals

Group financial targets

€mln

	2019*	2020	2021	2022	CAGR 19-22
Net banking income	557	575	589	602	2.6%
- o/w PPA	58	35	18	8	1 -47.8%
Loan loss provisions (LLP)	-85	2 -65	-65	-66	-8.2%
Net banking income – LLP	473	510	524	537	4.3%
Operating costs	-312	-332	-320	-314	0.2%
- o/w personnel costs	-130	-137	-135	-134	1.0%
- o/w other costs	-182	-196	3 -185	-180	-0.3%
Extraordinary Items	18	4 -22	0	0
P/L from sales of investments	-1	25	5 0	0
Pre-tax profit	177	181	203	223	8.0%
Net income	123	125	135	147	6.1%
- o/w PPA	41	24	12	5	-49.0%
Cost/income Cost/income (excluding NPL	55.9%	57.8%	54.4%	52.1%
business) Cost of credit (excluding NPL	49.7%	52.6%	49.6%	47.1%
business)	-1.20%	-0.84%	-0.79%	-0.75%

• 1• In 2022, remaining PPA is expected at ca. €40mln In 2022, DTA due to tax losses (non-convertible) are expected at ca. €60mln
• In 2019, loan loss provisions include €32mln extraordinary provisions on 4 large tickets 2
• In 2020, the pick up in other costs is maily driven by €8mln higher NPL recovery costs, €7mln rebranding costs and €5mln higher IT/digitalization costs 3
• In 2019 extraordinary items include €15mln from the closing of a tax proceeding of former Interbanca with no impact on Banca IFIS's net income. In 2020, they include the cost of voluntary exits 4
• €25 capital gain from the disposal of the Milan real estate 5

Group financial targets: highlights

€mln

	2019*	2020	2021	2022	CAGR 19-22
Customer loans	7.668	8.378	8.941	9.654	8.0%
- o/w IFIS NPL	1 350	1 584	1 787	1 936	12.8%
Total assets	10.412	11.299	12.196	12.730	6.9%
Direct funding	8.339	9.191	10.014	10.463	7.9%
- o/w customer deposits	139 5	071 5	217 5	467 5	2.1%
Shareholders Equity	1.540	1.597	1.674	1.759	4.5%
ROE	8.2%	8.1%	8.3%	8.6%
ROTE**	8.4%	8.3%	8.6%	8.9%
1 CET1***	1,036	1,141	1,229	1,350
CET1 ratio	11.0%	11.3%	11.5%	12.0%
Total capital ratio	14.6%	14.7%	14.8%	15.2%
RWA***	9,446	10,099	10,667	11,223
LCR	900%	600%	550%	350%
NSFR	110%	110%	110%	110%

1• CET1 and RWA do not fully consider RWA optimization strategy estimated at ca. 40bps

* 2019 figures are purely indicative and are based on 2019 most recent preview

** Net profit on average equity excluding intangible

*** CET1 and RWA do not fully consider RWA optimization strategy

Conclusions

Sustainable earnings

Transparency in financial disclosure

All business units are profitable

Focus on core business: factoring and NPL

Solid and achievable targets

Attractive dividend payout

2022 targets

• Net income at €147mln
• ROTE at ca. 9%
• Cost/income at 52%
• CET1 at 12%
• Annual dividend payout in the range of ca. 40%- 45% in the business plan

Table of contents

1		Mission and track record
2		Strategic guidelines and financial targets
	2.1	Strategic highlights
	2.2	Financial targets
	2.3	Conclusions
3		Appendix
	3.1	NPL business
	3.2	Commercial and Corporate Banking
	3.3	Enhancing operating machine
	3.4	Segment reporting

NPL business: positioning

• Pioneer in entering the Italian NPL market with experience since 2011 in investing and servicing
• Leader in principle investment in unsecured NPLs, with consolidated service business
• First in class track record
  • €24bn of GBV acquired
  • €1bn of cash recovery
  • GBV at €16.6bn, NBV at €1.2 bn and Expected Rate of Collection (ERC) of €2.4bn as of 30 Sept 2019
  • Proprietary database based on 1.2mln borrowers divided by cluster in terms of type of borrower, location, age, amount due, employment status, timeframe of recovery, probability of default
  • Proprietary servicing platform

* 2019 figures are purely indicative and are based on 2019 most recent projections

NPL business: positioning

NPL business: positioning #4 player in Italy in terms of GBV

			Top 10 Italian special servicers ranked by NPLs AuM(*)
Company	Shareholders	NPLs AuM (€bn)	Average Ticket (€k)	Secured (%)	Unsecured (%)
DO VALUE	Fortress/public market	78.2	178.9	27%	73%
INTRUM ITALIA	INTRUM	41.8	35.4	47%	53%
CERVED	Public company	41.0	76.1	54%	46%
BANCA IFIS	La Scogliera/public market	24.4	12.5	10%	90%
PRELIOS	DAVIDSON KEMPNER/public market	19.1	278.4	62%	38%
CREDITO FONDIARIO	Morgan Stanley/Elliot	14.2	97.3	42%	58%
PHOENIX	Anacap/Pimco	9.1	310.4	44%	56%
SISTEMIA	KKR	9.0	28.2	71%	29%
HOIST FINANCE	Hoist	8.2	7.2	5%	95%
GUBER	Vӓrde/funders	8.0	774.7	20%	80%

Portfolio Purchase - Become an investor in all NPL classes with a capital light model 3.1

• Acquisition of minority stake in FBS
  • Reduction in management costs
  • Acquisition of NPLs, continuing active participation in all disposal processes
  • Broadening purchasing to secured and unsecured NPLs
• Potential acquisition of specialized servicers / potential hiring professionals in specific NPL segments
• Accelerating the full integration of FBS, leveraging on complementary know-how of Banca IFIS (unsecured retail) and FBS (secured & corporate)
• Streamline the judicial and extrajudicial workout in secured and unsecured NPL
• Invest in digitalization / IT / Artificial Intelligence (AI)

Focus of next 6-12 months: Efficiency Focus of next 12-24 months: Capital light

From 2023 for NPLs subject to calendar provisioning

• Become an investor in all NPL classes with a capital light model
• Structuring investments for third parties

• Leverage on Banca IFIS's brand, strong origination capabilities, consolidated relationships with sellers, purchasing and recovery track record

• Attract co-investors in NPLs

• Offer opportunity to invest in secured and unsecured NPLs and in the form of equity and senior

Become an asset manager with purchasing power capabilities with a capital light model

Management action

Portfolio Purchase - Focus on next 6-12 months: efficiency

		Consolidating of	Growth in
	Unsecured retail	Small secured Corporate	Medium secured Corporate	Large Corporate
Ticket	10k-150k	100k-1mln	1mln-30mln	>30-50mln
Type	Judicial and extrajudicial recovery	Judicial and extrajudicial recovery Real estate disposals	Extrajudicial recovery Restructuring Asset disposals	Managed internally by banks Selective single name disposals
Market		Attractive and profitable market segment Barriers to entry		Competition by several players Need for specific professional skills
Strategy		Acquisition of FBS's minority stake + full integration of FBS		Potential acquisition/partnership on specific transactions with specialized services or potential hiring of experienced professionals

Portfolio Purchase – Company structure

Focus on next 12-24 months: capital light

a

b

c

Creation of two companies

• Investment company owning proprietary NPL portfolio (wholly owned) and several funds for NPL portfolios (open to co-investor)
• Servicing company acting as special servicer to own NPL portfolio and to newly acquired NPLs

Creation of funds for newly acquired NPLs

• Banca IFIS to act as co-investor
• Servicing performed by Banca IFIS
• Disposal of junior/senior notes depending on Banca IFIS requirements for NPL portfolio subject to calendar provisioning
  • Attract co-investors in NPLs

Disposal of junior / senior notes only starting from 2023 for NPL portfolios subject to calendar provisioning (does not apply to current proprietary portfolio)

Portfolio Purchase – Focus on digitalization, IT and AI 3.1

Onboarding B Portfolio valuation A Clustering valuation, recovery estimate (timing, cash amount, cost), collateral valuation efficiency

Documentation assessment (completion and compliance), documentation storage

• Transform top FTEs absorbing processes requiring ca. 25% of IFIS NPL workforce towards high/full automation
• Achieving economy of scale and streamlining

Select best recovery strategy C

Judicial vs. extrajudicial recovery External vs. internal recovery, best recovery team / company, predictive and behavioural scoring

Monitoring and payment collection

D

Payment reconciliation, payment automation, payment solicitation, delinquency monitoring

Be always at the cutting edge in digitalization, IT and Artificial Intelligence (AI)

Portfolio Purchase - Italian NPE market

Past Due UTPs + Sold NPLs • Migration from UTPs and past due to NPLs at 16% of the previous year • Migration from performing loans to NPE at 1.3% of previous year's loan • Annual NPE recovery at o 3% for sold NPL portfolios o 11% for NPLs in bank/originator o 16% for UTP in bank/originator Main drivers +5% -21% +2% CAGR 2020-22 NPE in the Italian market ^{94 79 66 64 66} 165 97 ^{73 53 33} 86 157 ^{195 220 243} 2017 2018 2019 2020 2022 345 342 ^{333 334 337} On Banks' Balance Sheet

book NPE ratio % 13.5 9.4 7.6 6.5 ~6.0

Inflows

stock

stock

Outflows

book

3.1

Portfolio Purchase - NPE disposals in the Italian market 3.1

7

2020 2021

30

• In 2020-22, ca. 70% of transactions will happen in the primary market and ca. 30% in the secondary market
• In 2020-22, the secondary market is expected to be driven by
  • o GACS regulation, which includes the periodic review of the servicers performance
  • o Disposals of part of the NPL portfolios acquired in 2017-2018
• Ca. 23% of NPL disposals will be unsecured. In 2020-22, the total disposals of unsecured NPLs is estimated at ca. €20bn

NPL disposals by unsecured and secured (€ bn) 18 64 16 6 84 Secured Unsecured

7

2022 Total

20

Portfolio Purchase - Banca IFIS acquisitions

Main drivers

• In 2020-22, Banca IFIS purchases are estimated at €8.5bn, (unsecured and opportunistic secured / corporate NPLs)
• In 2020-22, total net investment is estimated at €0.8bn

Servicing - Opportunistic approach

Servicing as part of capital light strategy

• Fee based business
• Working all NPL classes with specialization in unsecured/secured small tickets
• Proven track record in recovery
• Clear service contracts and reporting

Servicing – Banca IFIS NPLs

Main drivers

• €1.2bn of new AuM per year, with a cumulated AuM by the end of 2022 of 9.1bn
• Opportunistic servicing in secured (ca. 25% of new volumes) and unsecured (ca. 75% of new volumes)
• Focused on UTP and GACS servicing
• In 2019*, Banca IFIS expected, in terms of GBV, €5.5bn NPLs under servicing, of which €3.9 and €1.6bn of unsecured and secured NPLs, respectively. In 2019, net banking income from servicing is expected at €7.1mln

Table of contents

1		Mission and track record
2		Strategic guidelines and financial targets
	2.1	Strategic highlights
	2.2	Financial targets
	2.3	Conclusions
3		Appendix
	3.1	NPL business
	3.2	Commercial and Corporate Banking
	3.3	Enhancing operating machine
	3.4	Segment reporting

Factoring: market positioning

Leadership in SME factoring*** Customer Market share by Turnover*

** Source: Management accounting, data as of 30 June 2019

*** Source: Assifact, management accounting

Leasing: market positioning

* Source: Assilea

** Source: Management accounting for Banca IFIS, Assilea for market

42

3.2

Banca IFIS client potential

Strengthening customer relationships to increase market share

Four strategic initiatives to boost revenues

BUSINESS & CUSTOMER SEGMENTS A

Rethinking commercial coverage to exploit untapped potential in specific customer clusters

• Mid Corporate with a specific relationship model A
• New Territorial coverage for selected areas A
• Commercial offering rewamp (i.e. Fast Finance, Green Business for leasing) A

Redesign and innovate Commercial Banking go-tomarket approach with new digital interaction channels

• New "Online Hub" for Commercial & Corporate banking B
• Online Portals targeted to specific customer clusters or products (i.e. CQS) B
• Streamlined & automated Customer management and back office B
• Increase market share in factoring B

• Evolution of internal risk processes to ensure improved, automated and fully integrated risk management
• New automated risk processes based on advanced decision engines and bigdata analytics C D

Review Brand identity, communication strategy and positioning to strengthen marketing coverage

• Branding restyling
• Consolidate digital channels website to provide a "single point of entry" D

Business & customer segments

Two different customer segments with different needs

	Product offering	Service model	Risk approach	Profit (gross)
• • • • • Medium enterprises •	IAS Factoring Reverse Factoring Lending Working capital management Import/export services Advisory	• Relationship managers • Tailor made services • Offer a full range of products/services • Best time to cash	• Risk Mitigation: high standing of the counterparties, disciplined origination to best rated customers • Risk evaluation: dedicated team of credit analysts, focused on different business macro	• Medium revenues • Lower cost of risk • Cost to serve higher than average portfolio
€10-15mln Revenues Small & micro	• Factoring (primary based on receipt of notification from Invoice payers) • Lending backed by government guarantee (i.e. 662/92)	• Digital based & open banking model • Central marketing campaigns and advanced CRM commercial push	sectors • Risk Mitigation: Invoice payers (Debtors), government guarantees/ Confidi • Risk evaluation: advanced auto decisioning scoring process based on internal and external KPIs	• High revenues • Medium cost of risk • Cost to serve lower than average portfolio (digital banking)

3.2A

Digital Innovation New "Online Hub" for Commercial & Corporate banking customers

Banca IFIS's strategy

Superior customer experience - €18mln IT and digital investments

3.2B

Digital innovation New "Online Hub" for Commercial & Corporate banking customers

The New Bank's ONLINE HUB… private and innovative area

Extensive coverage on all Bank's Products & Services

• Full visibility on customer product portfolio and all Bank's business offer (i.e. current account, lending, Factoring, Leasing, …)
• A «fully fledged» platform able to let Customers manage digitally all products and services with the Bank

End to End digital proposition for customers & prospects

• Digital Cross and Up sell process to let Customers buy Bank's products and services in a full "self service" approach
• New digital onboarding for prospects thanks to full integration between the pre and post login web areas

3.2B

Advanced credit & risk management approach Automated processes based on advanced engines and analytics

Target: high quality portfolio with low credit risk

3.2C

New communication & brand strategy

Brand awarness framework*	Goals	Commercial & marketing tools	Targets
• Prospect companies have a vague and superficial knowledge of Banca IFIS (Brand awarness index=27/100) • Presentation of Banca IFIS as Bank specialized in SMEs	BRAND AWARENESS Increase brand awareness among all stakeholders	• ADV offline • Social Media • Non-conventional Marketing • Events	• SMEs • Individuals • Investors • Press
	BANK POSITIONING Strengthen the perception of Banca IFIS as a key player for Italian SMEs	• ADV online • Search engine optimization & search engine marketing • Targeted Events	• SMEs
	EMPLOYER BRANDING Develop sense of identity and belonging		Banca IFIS people

2020 re-branding investment ~ €7mln

3.2D

Table of contents

1	Mission and track record
2		Strategic guidelines and financial targets
	2.1	Strategic highlights
	2.2	Financial targets
	2.3	Conclusions
3		Appendix
	3.1	NPL business
	3.2	Commercial and Corporate Banking
	3.3	Enhancing operating machine
	3.4	Segment reporting

Enhancing operating machine

3.3		Enhancing operating machine
	3.31	Operating expenses
	3.32	Optimization of real estate portfolio
	3.33	Organizational structure simplification
	3.34	Becoming an ESG compliant company
	3.35	Opportunistic M&A

Operating expenses

Personnel costs

FTEs decrease despite new hiring due to voluntary exists, natural turnover and internal rotation

Optimization of real estate portfolio

• Banca IFIS disposed of a property located at Corso Venezia 56 in Milan for €50.5mln
• The sale of the property is aimed at rationalizing space management and at containing costs. Today, ca 300 FTEs in Milan are distributed between Corso Venezia and on the nearby Via Borghetto. Following the sale, all Milan employees will be relocated to Via Borghetto, which will be upgraded
• The sale of Corso Venezia will yield a pre-tax capital gain of €25mln (+8bps on CET1) to be booked in 2020 and an annual cost saving of approx. €1.5mln

Disposal of Milan building Development of new building in Mestre

• Strategic investment: creation of a new headquarter building to considerably increase employees comfort, safety, and to optimize building energy consumption with particular focus on renewables
• Rationalization and centralization of current real estate set-up in Mestre
• ~5,000 square meters of building surface, expected to be delivered by 2022

Organizational structure simplification

• Simplification and streamlining of reporting lines: 4 main units (Business, Capital Markets Operations, Finance)
• New Commercial & Corporate Banking division to coordinate SME activity
• Strengthening of the management team

3.33

Becoming an ESG-compliant company

• 100% green energy from renewable sources in all Banca IFIS locations
• Invest in eco-friendly buildings in Milan and Mestre with 50% Co2 reduction by 2022
• Launch of IFIS Leasing Green, the first leasing service to support development of electric and plug-in hybrid vehicles

2022 TARGET: ESG compliance certification (Bloomberg, Sustainalytics indexes)

3.34

Opportunistic M&A

Opportunistic small / specific M&As in target sectors

Acquisition of small and specific servicers to strengthen / complete some business units and/or hiring of specialist teams

Acquisition / partnership in Commercial Banking with high innovative technology businesses in order to be at the forefront of innovation

Acquisitions to provide incremental earnings and value creation for shareholders

Table of contents

1		Mission and track record
2		Strategic guidelines and financial targets
	2.1	Strategic highlights
	2.2	Financial targets
	2.3	Conclusions
3		Appendix
	3.1	NPL business
	3.2	Commercial and Corporate Banking
	3.3	Enhancing operating machine
	3.4	Segment reporting

New segment reporting

		Current business units included in the segment
Commercial & Corporate Banking	Factoring*	• Commercial credit in Italy, related exclusively to factoring (excluding short and medium-long term credit) • Pharmacies, related exclusively to factoring (excluding short and medium-long term credit**) • Pharma • International • Tax receivables
	Leasing	• Financial leasing • Operating leasing
	Lending	• Commercial credit in Italy, for the part of the business relating to short and medium-long term credit • Pharmacies, for the part of business relating to short and medium-long term credit
	Corporate Banking	• Structured Finance • Special Situations • Equity investments • Advisory
NPL		• IFIS NPL • FBS
Non core		• Workout & Recovery area, part of the portfolio acquired by GE capital • Comm. Lending area, part of the portfolio acquired by GE capital • PTF Retail
G&S		• Central Services • Treasury • Capitalfin

* Includes other trade receivables

** Corresponds to the Credifarma BU

NPL business: financial targets

€mln

	2019*	2020	2021	2022	CAGR 19-22
Net banking income	244	264	276	281	4.8%
Operating costs	-156	-169	-166	-162	1.3%
- o/w personnel costs	-39	-42	-42	-42	2.5%
- o/w other costs	-117	-127	-124	-121	0.9%
Pre-tax profit	88	96	111	119	10.5%
Net income	62	66	74	78	7.9%
Net NPLs	1,350	1,584	1,787	1,936	12.8%
RWA	2,050	2,485	2,775	2,913	12.4%
Allocated capital	225	281	320	350	16.0%
Cost/income	63.9%	63.8%	59.9%	57.8%
Return on allocated capital	27.7%	23.7%	23.1%	22.3%

• Revenue and cost growth driven by new NPL purchases and workout progress of outstanding NPL portfolio
• Operating costs consist mainly on legal, recovery networks and FTEs charges
• Costs related to the judicial and extrajudicial activities are booked in the P&L with the progress of the workouts. Consequently, when the cash recovery begins, the operating costs have been already expensed
• The return on allocated capital is expected to decrease slightly, mainly due to higher funding costs. Efficiency and better NPL quality (in terms of documentation, vintage and collateral) are partially offsetting higher NPL acquisition prices

Commercial & Corporate banking: financial targets

€mln

	2019*	2020	2021	2022	CAGR 19-22
Net banking income	244	256	283	295	6.6%
Loan loss provisions (LLP)	-53	-49	-52	-55	1.4%
Net banking income – LLP	191	207	231	240	7.9%
Operating costs	-115	-127	-124	-121	1.5%
- o/w personnel costs	-78	-84	-83	-81	1.4%
- o/w other costs	-37	-43	-41	-39	1.8%
Pre-tax profit	76	80	107	120	16.4%
Net income	57	58	73	79	11.8%
Turnover	14,006	14,662	15,663	16,273	5.1%
Customer loans	5,551	6,004	6,406	6,925	7.6%
RWA**	5,254	5,576	5,892	6,453	7.1%
Allocated capital	576	630	679	776	10.5%
Cost/income	47.3%	49.6%	43.9%	40.9%
Cost of credit	1.01%	0.88%	0.85%	0.83%
Return on allocated capital	9.9%	9.2%	10.8%	10.2%

• Revenues resilient in a negative rates scenario

3.4

• Revenue growth driven by client growth, digital innovation and new brand strategy
• Cost control and process digitalization
• Loan loss provisions at ca. 80bps by the end of 2022 due to new credit risk management process aimed at reducing concentration risk and underwriting process

Interest rates environment

			61
	2020	2021	2022
Prometeia	-0.40	-0.40	-0.38
Business plan scenario	-0.45	-0.43	-0.35
	Euribor 3M (average %)

* 2019 figures are purely indicative and are based on 2019 most recent preview

** RWA credit risk only

Reduction mainly related to the RWA increase in equity investments due to Basel IV

Commercial & Corporate banking o/w Factoring

€mln

	2019*	2020	2021	2022	CAGR 19-22
Net banking income	166	176	190	196	5.7%
Loan loss provisions (LLP)	-40	-31	-32	-31	-7.5%
Net banking income – LLP	126	145	159	164	9.2%
Operating costs	-85	-92	-90	-87	0.8%
- o/w personnel costs	-51	-55	-54	-53	1.2%
- o/w other costs	-34	-38	-36	-34	0.2%
Pre-tax profit	41	53	69	77	23.4%
Net income	29	37	46	51	20.5%
Turnover	14,006	14,662	15,663	16,273	5.1%
Customer loans	3,290	3,526	3,629	3,845	5.3%
RWA**	2,875	3,011	3,034	3,231	4.0%
Allocated capital	315	340	349	389	7.2%
Net banking income / customer loans	5.5%	5.7%	5.7%	5.6%
Cost/income	51.3%	52.4%	47.4%	44.5%
Cost of credit	1.31%	1.01%	0.94%	0.90%
Return on allocated capital	9.2%	10.8%	13.1%	13.1%

• Specialization, time to cash (< 3 days) and commercial effort as main growth drivers
• Operating costs substantially stable due to cost control and process digitalization
• Loan loss provisions at ca. 90bps by the end of 2022 due to new credit risk management process
• Strict monitoring of allocated capital and return

Commercial & Corporate banking o/w Leasing

€mln

	2019*	2020	2021	2022	CAGR 19-22
Net banking income	53	52	55	56	2.1%
Loan loss provisions (LLP)	-11	-12	-11	-12	0.5%
Net banking income – LLP	41	41	44	45	2.6%
Operating costs	-25	-28	-26	-26	1.2%
- o/w personnel costs	-22	-24	-23	-22	0.2%
- o/w other costs	-2	-4	-3	-3	9.7%
Pre-tax profit	17	13	18	19	4.6%
Net income	15	11	14	13	-4.2%
Leasing	1,447	1,488	1,533	1,574	2.8%
RWA**	1,469	1,455	1,490	1,398	-1.6%
Allocated capital	161	164	172	168	1.5%
Net banking income / customer loans	3.7%	3.6%	3.7%	3.6%
Cost/income	46.9%	52.8%	47.1%	45.6%
Cost of credit	0.81%	0.81%	0.75%	0.75%
Return on allocated capital	9.4%	6.9%	8.2%	7.9%

• Offer customized services bundled with leasing and time to cash as main growth drivers
• Cost control
• Cost of credit in line with historical track record
• Strict monitoring of allocated capital and return

*2019 figures are purely indicative and are based on 2019 most recent preview

** RWA related to credit risk, intercompany funding and investment on IFIS Rental (not included in prudential consolidation)

Divisional breakdown

	NPL			Commercial & Corporate banking		Non Core and G&S
	2019	2022	2019	2022	2019	2022
Net Income €mln (% of total)	62.3 51%	78.2 53%	56.9 46%	79.5 54%	3.6 3%	-10.7 -7%	Mainly due to: • decrease of PPA reversal (-€50mln) • decrease of loan loss provisions
Capital allocation (% of total)	225 24%	350 28%	576 62%	776 63%	123 13%	115 9%	(+€12mln)
Return on allocated capital**	27.7%	22.4%	9.9%	10.2%	3.0%	-9%
			Delta mainly due to cost of funding increase

** Net income / allocated capital. Where allocated capital = RWA credit risk * 2019 CET1 ratio.

Proprietary Portfolio - €1.5bn

• Efficient management of excess cash (ECB deposits)

generate gradually increasing return (€150mln)

Investment • Use of enhancing and hedging strategies coupled with both risk and expected credit loss control

• Low cumulative RWA level

containing risk (€650mln)

• ECB / funding eligibility
• Liquidity portfolio: short term government portfolio (15 months average maturity) aiming to minimize liquidity cost (€650mln)

• Core portfolio: long term bond portfolio (5Y average maturity) aiming to maximize capital appreciation while

• Satellite portfolio (ex Trading): tactical-medium term diversified portfolio (2Y average maturity) aiming to

Proprietary portfolio clusters

strategy

Expected return net of funding

Funding

Bond issues (€ mln)

Target of €1.7bn bond issue to be reviewed in the Industrial Plan period considering funding requirements / volume growth, funding costs and funding mix diversification

Table of contents

1		Mission and track record
2	Strategic guidelines and financial targets
	2.1	Strategic highlights
	2.2	Financial targets
	2.3	Conclusions
	3 Appendix
	3.1	NPL business
	3.2	Commercial and Corporate Banking
	3.3	Enhancing operating machine
	3.4	Segment reporting

Commercial & Corporate banking: regulatory on capital requirement

Issue	Description	Banca IFIS impact
Public sector exposures	• Since 2021 the definition of past due loans will be similar to the private sector criteria (harmonized definition of default from EBA)	• The potential deterioration inflow vs. Public Administration will be partially mitigated by the introduction of management actions aimed at neutralising «technical past dues»
Calendar provisioning	• Non performing exposures (past due, UTPs and NPLs), from loans originated since April 2019, have to respect specific provisions (unsecured to be provisioned in 3Y, secured in 9Y)	• The rule has limited impact on Banca IFIS Commercial & Corporate Banking loans thanks to the asset quality and the provisioning policy already in force
MREL	• Minimum requirement for own funds and eligible liabilities starting from 2024 (BRRD directive)	• No relevant impact expected for Banca IFIS

3.5

Calendar provisioning

Calendar Provisioning: CRR Prudential Reserve – Minimum loss coverage factors
Year following classification as non performing	Unsecured	Secured by official export agencies	Secured by innovable property or residential loan guaranteed by eligible guarantor	Secured by other collateral
1	0%	0%	0%	0%
2
3	35%
4			25%
5			35%
6			55%
7	100%		70%	80%
8		100%	80%
9			85%	100%
10,…			100%

IFIS NPL

• We estimate there may be a time lag of [3-6] years from enforcement before it may impact Banca IFIS capital requirements:
  • o We assume that banks may sell NPLs [1-3] years after classification into NPEs
  • o We estimate further [2-3] years before newly acquired NPLs represent a significant portion of the IFIS NPL portfolio
• In the medium term, we expect new business opportunity for Banca IFIS as banks speed up recoveries / disposals

Banca IFIS

• Strict credit policy. Bad loans coverage > 80% for Enterprise Segment (excluding POCI)

Unsecured loans: illustrative timetable

Calendar Provisioning to be approved by EU Parliament (Pillar 1)

EU calendar provisioning to start affecting Banca IFIS only in 2022-24

3.5

Unsecured loans: weight on the whole NPL portfolio Chart is illustrative, based

Calendar Provisioning approved by EU Parliament (Pillar 1) on preliminary analysis

Until 2022-23, NPLs subject to EU calendar provisioning will be a minority stake of Banca IFIS NPL

3.5

Disclaimer

• This Presentation may contain written and oral "forward-looking statements", which includes all statements that do not relate solely to historical or current facts but rather reflect subjective judgments that may or may not prove to be correct, and which are therefore inherently uncertain. All forwardlooking statements rely on a number of assumptions, expectations, projections and provisional data concerning future events and are subject to a number of uncertainties and other factors (including, without limitation, the economic environment and changes in governmental regulations, fiscal policy, planning or laws in the Republic of Italy, other relevant jurisdictions and the EU), many of which are outside the control of Banca IFIS (the "Company"). There are a variety of factors that may cause actual results and performance to be materially different from the explicit or implicit contents of any forward-looking statements and thus such forward-looking statements are not a reliable indicator of future performance. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law and regulations. The information and opinions contained in this Presentation are provided as at the date hereof and are subject to change without notice. Neither this Presentation nor any part of it nor the fact of its distribution may form the basis of, or be relied on or in connection with, any contract or investment decision.
• The information, statements and opinions contained in this Presentation are for information purposes only and do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to purchase or subscribe for securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. None of the securities referred to herein have been, or will be, registered under the U.S. Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction of the United States or in Australia, Canada or Japan or any other jurisdiction where such an offer or solicitation would be unlawful (the "Other Countries"), and there will be no public offer of any such securities in the United States. This Presentation does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or the Other Countries. Copies of this document are not being made and may not be distributed or sent into the United States or the Other Countries.
• The document defines the main guidelines of economic and financial development of Banca IFIS Group considering the bank's market potential in an positive and ordinary macro scenario. All forecast contained herein are based on 2019 year end preview: we underline that all data referred to 2019 are the best estimate at the current date and are purely indicative. At the date of this Presentation all accounting procedure are in process and will be concluded in accordance with the financial calendar of the Company. Every preliminary results and any other figures related to 2019 included in this document are therefore subject to changes and amendments
• Neither the Company nor any member of Banca IFIS nor any of its or their respective representatives directors or employees make any representation, express or implied with respect to such statements nor accept any liability whatsoever in connection with this Presentation or any of its contents or in relation to any loss arising from its use or from any reliance placed upon it.