Earnings Release • Aug 3, 2017
Earnings Release
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August 3rd 2017
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Andrea Mangoni Group CEO
Fabio Balbinot Chief Financial Officer
Manuela Franchi Head of IR, Finance, M&A
Previously CEO of ACEA
CEO of Italfondiario from 2011 to 2016 and General Manager since 2010
Finance and Acquisition at Pirelli RE (Prelios) from 2001 to 2004
Joined doBank in August 2016
doBank maintained the management of the NPLs at the same economic conditions as UniCredit MSA1, increased GBV under management and secured the ancillary services increasing revenue per GBV managed
✓ doBank, not only the largest Special Servicer in Italy, but now also the largest NPL Master Servicer in the country
| Veneto Banks | ▪ From June 26, the good assets of the 2 Veneto banks to be transferred to Intesa while the bad assets will be managed by commissioners nominated by the Bank of Italy, which will remain in the banks in liquidation ▪ State-guarantee for UTP transferred to Intesa and eventually to the bad bank Estimated NPLs pool to be in excess to what previously announced in their ▪ respective Business Plan for a total estimated amount of over €18.8bn ▪ SGA role going forward |
|---|---|
| MPS | ▪ Recapitalization by the State closed ▪ Quaestio subscribed equity and mezzanine tranche of €26bn secutization ▪ Juliet servicing platform's sale in exclusivity with Quaestio |
| Casse di Cesena, Rimini e San Miniato |
▪ Acquisition by Credit Agricole and investment by Atlante in the NPL portfolio |
| Carige | ▪ Announced sale of €1.4bn portfolio and sale of Servicing platform to manage all NPL current and future |
| € m | 1H 20161 |
1H 2017 | ∆ (%) | |||
|---|---|---|---|---|---|---|
| e s u r n e e v v ri e d R |
Huge serviced portfolio |
GBV EoP | 83bn | 80bn | -4.5% | Collections, write-offs and sale of ▪ portfolios by clients re-balanced by inflows from new and existing clients |
| Best-in-class collections |
Collections | 0.6bn | 0.9bn | +37% | Improving performance in 2016 (+20% ▪ yoy) and 1H17 (+37% vs 1H 16 or +28% adjusted for classification differences) |
|
| L | Visible revenue base | Gross revenues |
91 | 105 | +15% | ~85% of servicing revenue related to ▪ long term servicing agreements ▪ Ancillary services and co-investments offering substantial room for growth |
| & e r P u e ct pl u r m st Si |
Operating leverage | Operating costs |
56 | 65 | +16% | Fixed HR costs equal to 88% of total HR ▪ costs2 ▪ IT & SG&A cost efficiencies to come from 2H17 |
| Proven profitability | EBITDA | 27 | 30 | +13% | ▪ Extraordinary costs from IT in 1H17 ▪ Seasonality of collections reflected on EBITDA |
|
| n o h ti a s r a e C n e g |
Limited capex | Cash conversion |
24 | 28 | +19% | ▪ Significant portion of IT and other investments expensed at income statement ▪ 1H17 affected by one-off investments |
| Benefits from tax assets |
Tax Assets |
2016FY 143 |
109 | -25% | ▪ Tax assets fully off-settable against direct and indirect taxes |
▪ GBV decreasing from €80.9bn to €79.5bn in 1H17, mainly driven by significant trend of collections and net write-off as well as portfolios sales by Clients
Notes: 1. Including terminated mandates and default interests accruals. In 1H17 the data includes also a portion of the portfolio transferred to Pimco as part of the Fino Project
Collections for 2014 and 2015 based on Italfondiario only.
Italfondiario collections for 2014-15-16 are accounted for net cash flow consistent with their historical reporting
| Business area | Key Facts | Financial Results |
|---|---|---|
| ▪ Closed contract with FINO starting from 2H17 ▪ Finalizing agreements on €3bn loan portfolios already under management by doBank |
Revenues in €m 9.0 6.7 |
|
| ▪ Closed contract with FINO starting from 2H 2017 ▪ Significantly higher real estate auctions in the market (+31% 2017E vs 2015A3) which sustained auction facilitation revenues |
1H20162 1H2017 1H2016 1H2017 |
|
| Judicial Support1 |
▪ Start-up in 1H17 Closed contract with FINO in July 2017 and ▪ finalizing agreement with large Italian bank in 3Q17 |
5.5 3.1 |
| Other | ▪ Securitization activities from due diligence and business planning ▪ Increased revenues from partnership with a major current Italian Bank client ▪ Co-investment revenue related to €6.3m investment |
2 2Q20162 2Q2017 2Q2016 2Q2017 |
Notes: 1. 2016 RE related services costs included in SG&A as part of the broader UBIS contract while they are allocated to RE expenses in 1H17 and for consistency in 1H16 2. Based on total opex gross of expense recoveries. 3. 1H2016 aggregated doBank+Italfondiario
Excess capital to support business growth and remunerate investors
| Maintaining leadership position in Servicing |
▪ Continue performance improvement through standardization and simplification and leveraging on the recent favorable legislative framework Full value extraction from long-term contracts currently in place and Fortress ▪ relationship ▪ Strong business development leveraging also on the co – investment opportunity to gain servicing mandates |
|---|---|
| Development of Ancillary services offering |
▪ Services development for captive clients increasing penetration rate ▪ Commercial effort for non-captive customers in banking and other sectors |
| Improvement of operational efficiency |
IT expenses allowing further improvement of Group efficiency ▪ Exploit operative leverage from higher volumes brought into the platform ▪ doSolutions to create short and medium term cost synergies ▪ |
Income Statement1
| €m | 1H 2017 | 1H 20161 | Δ (%) |
|---|---|---|---|
| Servicing revenues | 95.8 | 84.3 | 14% |
| o/w Banks | 89.2 | 77.5 | 15% |
| o/w Investors | 6.6 | 6.7 | -3% |
| Co-investment revenues | 0.2 | 0.0 | n.s. |
| Ancillary and other revenues | 8.8 | 6.7 | 32% |
| Gross Revenues | 104.8 | 91.0 | 15% |
| Outsourcing fees | (9.2) | (8.1) | 14% |
| Net revenues | 95.6 | 82.9 | 15% |
| Staff expenses | (40.7) | (37.3) | 9% |
| Administrative expenses | (24.6) | (18.7) | 31% |
| o/w IT | (12.4) | (5.8) | 114% |
| o/w Real Estate | (4.0) | (4.6) | -12% |
| o/w SG&A | (8.2) | (8.4) | -2% |
| Operating expenses | (65.3) | (56.0) | 16% |
| EBITDA | 30.3 | 26.8 | 13% |
| EBITDA Margin | 29% | 29% | -2% |
| Adj. Of Fixed and Int. Assets | (0.8) | (0.8) | 1% |
| Other | 0.5 | (1.1) | n.s. |
| EBIT | 30.0 | 24.9 | 20% |
| Net financial interest and commission | (0.1) | (0.1) | 3% |
| EBT | 30.0 | 24.8 | 21% |
| Income tax for the period | (9.9) | (10.2) | -3% |
| Profit (loss) from group of assets sold and held for sale net of tax |
(0.4) | - | n.s. |
| Net Income | 19.7 | 14.6 | 34% |
Balance Sheet1
| €m Assets |
1H 2017 | 2016PF | Δ | (%) |
|---|---|---|---|---|
| Cash and cash equivalents |
0.0 | 0.0 | 0.0 | 11% |
| Available-for-sale financial assets |
7.4 | 1.0 | 6.4 | 608% |
| Loans and receivables with banks |
14.9 | 52.6 | (37.7) | -72% |
| Loans and receivables with customers |
2.9 | 10.8 | (7.9) | -73% |
| Equity investments |
1.6 | 1.6 | - | 0 % |
| plant and Property, equipment |
1.5 | 0.6 | 0.9 | 137% |
| Intangible assets |
2.6 | 2.1 | 0.5 | 25% |
| o/w goodwill |
- | - | - | |
| Tax assets |
108.6 | 143.0 | (34.5) | -24% |
| a) Current tax assets |
8.9 | 37.7 | (28.8) | -76% |
| b) Deferred tax assets |
99.6 | 105.3 | (5.7) | -5% |
| o/w 214/2011 pursuant to Law |
55.4 | 55.4 | - | 0 % |
| Non-Current assets held for sale and discontinued operations |
0.0 | 2.5 | (2.5) | -100% |
| Other assets |
146.6 | 114.1 | 32.5 | 28% |
| Total assets |
286.1 | 328.4 | (42.4) | -13% |
| Liabilities and shareholders' equity | ||||
| Deposits from banks | 13.1 | 13.1 | 0.0 | 0 % |
| Deposits from customers | 10.9 | 11.1 | (0.1) | -1% |
|---|---|---|---|---|
| Tax liabilities | 0.2 | 0.2 | (0.0) | -20% |
| a) Current tax liabilities | 0.2 | 0.2 | (0.0) | -21% |
| b) Deferred tax liabilities | 0.0 | 0.0 | (0.0) | -5% |
| Liabilities associates with non-current assets held for sale and discontinued operations |
- | 1.7 | (1.7) | -100% |
| Other liabilities | 50.1 | 56.0 | (5.9) | -11% |
| Employee termination indemnities | 10.2 | 10.2 | 0.0 | 0 % |
| Provision for risks and charges | 23.6 | 25.4 | (1.8) | -7% |
| Valuation reserves | 0.2 | 0.3 | - | 0 % |
| Reserves | 117.2 | 117.2 | - | 0 % |
| Share capital | 41.3 | 41.3 | - | 0 % |
| Treasury shares (-) | (0.3) | (0.3) | - | 0 % |
| Net profit (loss) (+/-) | 19.7 | 52.3 | (32.7) | -62% |
| Total liabilities and shareholders' equity | 286.1 | 328.4 | (42.4) | -13% |
24 Notes: 1. Consolidated reclassified data.
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