Annual Report • Mar 29, 2017
Annual Report
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| Contents 2 |
|---|
| Introduction 4 |
| Letter from the Chairman and the CEO to Shareholders 4 |
| Corporate Bodies 7 |
| Businesses and brands 8 |
| Context 11 |
| Reference markets 16 |
| The Bank 21 People 21 |
| How we operate 28 |
| Economic value generated and distributed 37 |
| Directors' Report 39 |
| Introductory notes on how to read the data 39 |
| Highlights 40 |
| Normalised Highlights 41 |
| Group KPIs 42 |
| Reclassified results by business segment 43 |
| Reclassified Quarterly Evolution 46 |
| Reclassified Group Historical Data(1) 48 |
| Results' presentation 49 |
| Impact of regulatory changes 50 |
| Contribution of business segments 51 |
| Group financial and income results 66 |
| Main risks and uncertainties 82 |
| Banca IFIS shares 82 |
| Significant events occurred during the year 85 |
| Significant subsequent events 85 |
| Outlook 85 |
| Other information 88 |
| Consolidated Financial Statements 91 |
| Consolidated Statement of Financial Position 91 |
| Consolidated Income Statement 92 |
|---|
| Consolidated Statement of Comprehensive Income 93 |
| Statement of Changes in Consolidated Equity at 31 December 2016 94 |
| Statement of Changes in Consolidated Equity at 31 December 2015 95 |
| Consolidated Cash Flow Statement 96 |
| Notes to the Consolidated Financial Statements 97 |
| Part A - Accounting policies 98 |
| Part B - Consolidated statement of financial position 124 |
| Part C - Consolidated income statement 154 |
| Part D - Consolidated statement of comprehensive income 168 |
| Part E - Information on risks and risk management policies 169 |
| Part F - Consolidated equity 209 |
| Part G - Business combinations 215 |
| Part H - Related-party transactions 218 |
| Part I - Share-based payment agreements 220 |
| Part L - Segment reporting 221 |
| Country-by-country reporting 227 Declarations 228 |
| Certification on the consolidated financial statements pursuant to the provisions |
| of article 154-bis, paragraph 5, of the Legislative Decree 58 of 24 February |
| 1998 and article 81-ter of Consob Regulation no. 11971 of 14 May 1999 as |
| amended 228 |
| Board of Statutory Auditors' report 229 |
| Independent auditors' report on the consolidated financial statements 240 |
Dear Shareholders,
In the year just ended, our Bank made another important step forward on the growth path it has been on for years now.
For most of 2016, Banca IFIS has dedicated its organisation and resources to the acquisition of the former Interbanca Group. This milestone is already producing some of the results expected by management, such as bolstering the Bank's capital—which will allow us to grow further. With this acquisition, the new Banca IFIS Group has strengthened its mar-
ket positioning, become more robust, and brought new people on board: we now number more than 1,300. And the frenzy of activity and growth that we experience every day at the Banca IFIS Group is occurring within a challenging external context. The banking industry is not yet out of the woods, and this severely affects Italy's real economy— which is hungry for a comeback and new investments. Like us, it is eager to work hard in order to accomplish virtuous growth and development goals. Against this backdrop, Banca IFIS has the resources and liquidity to support businesses and households, pursuing a coherent course of action.
2016 saw not only dramatic changes, but also some important confirmation. Our way of banking is fit to compete in a diverse competitive landscape, which features not only banks but also global web giants entering the credit industry or nimble start-ups. Our penchant for moving fast allows us to work side-by-side (and sometimes compete) with global companies in innovating and adopting new technologies, leading the Bank to new frontiers in its relations with customers. A clear example of our ability to re-imagine the value chain of our traditional businesses is the NPL Area, which has achieved results considered impossible only a few years ago while providing sustainable solutions to as much of the economy as possible.
The CEO will now discuss the strategies that produced these results as well as how the Bank has made its operations more robust and sustainable over time.
Profitability, liquidity, and capital discipline: these are the three pillars of our operations— and the growth drivers we wanted for the new Banca IFIS Group, which, as the Chairman said, has made us more numerous, complete, and responsible towards Italy's economy.
More numerous because we have grown stronger thanks to an acquisition that is key for us, bringing a new sales force and an increasingly active mobile presence throughout the country. Implementing digital solutions in distributing and creating products that the markets consider useful allows us to be increasingly present, active, and effective.
More complete, because we can
now offer other products and services for SMEs alongside short-term financing. We will be able to serve businesses better, complementing our services to support working capital—Banca IFIS's traditional core business—with the former Interbanca Group's ability to grow in the leasing and medium-term financing sectors. Together, we will have more customers, offer more products, increase our operational capacity, and have more ways to accomplish our goals.
More responsible, because the true strength of Banca IFIS lies in bringing together the competencies of the two Groups. Thanks also to this integration, Italy will have a player determined to support healthy businesses that want to grow, aware of the importance of innovation in a world in dire need of change.
After years of relentless growth, we are aware of our responsibility to shareholders, the Bank, and Italy's real economy. We know that being a Bank means being a business—but above all, it means bearing a responsibility. We know that only a Bank capable of achieving its results as well as bring a noticeable improvement to the economy it operates in has the dignity to sustainably conduct its business over time.
This is the spirit and the vision that drove us to work hard throughout 2016 in a challenging environment of extremely low interest rates and muted economic growth. Concerning our support to businesses, we have made considerable progress by increasing the number of customers—a prerequisite to boosting profitability. Integrating the distribution networks and the cross-selling with Interbanca lending and leasing customers offer us a significant opportunity to grow stronger. Concerning non-performing loans, we have developed innovative management and collection solutions as well as acquired sizeable portfolios. This allowed us to increase profitability and achieve an acknowledged leadership position in the market. We effectively managed tax receivables as Italy's Public Administration started paying off its arrears at a faster pace.
The results achieved, as well as our hunger for growth and the vision that guides us, will accompany the development of our Bank. In 2017, we will bolster our presence to increasingly improve our services to businesses and households as well as ensure the Group remains profitable.
These are challenging times for the Bank and the entire credit industry, requiring dramatic changes and the ability to question our way of working. The digital transformation has already unsettled—and will continue chipping away at—the certainties of a system that can no longer afford to pass the cost of its inefficiencies and inability to innovate onto the real economy.
But change is not limited to technology. Without the people—the women and men that innovate the old ways every day with their work—nothing would change. We want to thank and acknowledge all 1,300 employees that contributed to an outstanding 2016 and will continue to develop our Project with their imagination and intelligence. Without all of us, all this would not have been possible. Without all of us, the future will be challenging.
The results presented by the CEO give us the strength to tackle 2017 with enthusiasm. This is a crucial year for our Bank, and we are enjoying great success on the stock market. We are certainly not stopping here. We have the resources and room to do much more, achieving new results and meeting the expectations of all the Group's stakeholders—never beholden to the short term, but rather looking years into the future. I want to thank all Shareholders for placing their confidence in our Bank—as well as all the employees that make this project possible.
CEO Giovanni Bossi (1) Directors Giuseppe Benini
Chairman Sebastien Egon Fürstenberg Deputy Chairman Alessandro Csillaghy De Pacser Francesca Maderna Antonella Malinconico Riccardo Preve Marina Salamon Daniele Santosuosso
1) The CEO has powers for the ordinary management of the Company.
Alternate Auditors Guido Gasparini Berlingieri
Corporate Accounting Mariacristina Taormina Reporting Officer
Massimo Miani
Valentina Martina
Fully paid-up share capital 53,811,095 Euro Bank Licence (ABI) No. 3205.2 Tax Code and Venice Companies Register Number: 02505630109 VAT No.: 02992620274 Enrolment in the Register of Banks No.: 5508 Registered and administrative office Member of Factors Via Terraglio 63, Mestre, 30174, Venice, Italy Chain International Website: www.bancaifis.it
| 1983 | I.f.i.s. spa was born in Genoa |
|---|---|
| 1989 | IFIS shares are admitted at the "Mercato Ristretto" of Genoa and in 1990 also of Milan |
| 2003 | One year after the start of the baking activity, Banca IFIS is admitted at the MTA (Electronic Stock Market) of Milan |
| 2004 | Banca IFIS is admitted to the star segment of the Italian Stock Exchange |
Banca IFIS is a bank listed on the STAR segment of Borsa Italiana (IF:IM) that operates in banking sectors with strong profit margins. The Bank has adopted simple and highly-centralised organisational models, allowing to run the individual businesses through local networks and channels, rather than conventional branches. The key elements of our strategies are protecting our capital; investing our liquidity in activities offering adequate returns; and maintaining a high level of liquidity.
Banca IFIS is on a path to expand into certain segments of lending, specialty finance and leasing which led the Bank to finalise the acquisition of the former Interbanca Group on 30 November 2016.
This resulted in the creation of two new sectors, "Corporate Banking" and "Leasing", which, together with the traditional "Trade Receivables" segment, operate under the "Banca IFIS Impresa" brand.
The brands through which the Banca IFIS Group operates, financing the real economy, are:
• Banca IFIS Impresa, dedicated to short-term factoring, corporate banking (medium/long-term and structured finance), and leases (both operating and finance) for small, medium and micro enterprises. Banca IFIS Impresa operates both in Italy and abroad—especially in Poland, through the subsidiary IFIS Finance, which specialises in factoring services (import/export).
Banca IFIS Impresa targets SMEs that are not benefiting from the liquidity available in the market including the companies that work with the Italian Public Administration. Banca IFIS Impresa provides several services:
• Banca IFIS Pharma, through the Pharma Business Unit, supports the trade receivables of local health services' suppliers, i.e. companies seeking to factor receivables due from Italy's National Health Service without recourse—thus protecting themselves from the risk of late payments. Banca IFIS Pharma also supports pharmacists with a dedicated Business Unit that provides solutions designed to meet short- and medium-term financing needs;
• Banca IFIS NPL Area and CrediFamiglia operate in the market for distressed retail loans in the consumer retail and micro-corporate sectors. Banca IFIS NPL Area acquires/sells and manages portfolios of non-performing loans, while CrediFamiglia carries out judicial and non-judicial collection operations through different channels: call centre, in-house network, external network, Legal Factory, Legal Small Ticket;
Fast Finance focuses on tax receivables. It collects direct and indirect taxes and tax receivables, either performing or arising from insolvency proceedings. Specifically, it assesses and manages:
• rendimax and contomax are the Bank's two retail funding instruments. They are included in "Governance & Services" for segment reporting purposes. Specifically, rendimax is the high-yield online savings account for individuals, companies and insolvency proceedings, while contomax is the free on-line crowd current account and was launched in 2013.
Global economic conditions have improved slightly, but several sources of uncertainty still cloud the outlook— especially in the United States, where the new administration has not yet fleshed out the details of its economic policies: the announced budget plans could have an expansionary impact although this is currently hard to quantify—but the adoption and spread of protectionist trade measures could act as a drag on economic activity. Global GDP growth could be held back by turmoil in emerging economies as a result of the normalisation of US monetary policy.
The Euro area continues growing at a moderate, if gradually consolidating, pace. The risk of deflation has fallen; prices were up in December—although core inflation is still low. To maintain adequately expansionary monetary conditions and boost inflation, the ECB's Governing Council has extended its asset purchase programme until at least December 2017 or beyond, if need be. Starting from April 2017, the central bank will scale back its monthly purchases to 60 billion Euro.
The data shows that the Italian economy continued recovering during the autumn, albeit moderately. Industrial production, energy consumption and freight transport are all up, and business confidence indicators are currently at high levels: therefore, in the fourth quarter of 2016 GDP could have risen at nearly 0.2 percent compared to the previous quarter.
In recent months, lending to non-financial corporations has continued growing, and also business lending is increasing—although growth remains modest. The credit quality of Italian banks continues benefiting from the improved business cycle, leading to a further decline in new non-performing exposures.
Italy's economy is projected to grow by 0.9 percent in both 2016 and 2017, and 1.1% in 2018 and 2019. Domestic and, starting from 2017, a gradually strengthening foreign demand are expected to remain the main drivers.
SMEs: SMEs are adequately diversified by size and geography, with a +0,4% increase in 2015. The creditworthiness of this type of businesses is related to their revenues (+3% compared to 2014) and, despite the modest economic recovery, over 50% of SMEs are considered creditworthy, showing also shorter payment times.
Factoring: Factoring turnover accounts for over 11% of GDP; in 2016, the product's growth rate has gradually increased compared to 2015, as volumes continued rising in the fourth quarter of last year and the trend is expected to continue into 2017.
Leasing: In 2016, there was an acceleration in the growth trend that began in 2014, especially concerning light commercial vehicles and industrial ones. Leasing is forecast to continue growing in 2017, as businesses must keep on upgrading their equipment—and also because of government-backed incentive schemes for SMEs, which account for 75% of leasing volumes.
Structured Finance: Activity in the Italian M&A market remained brisk also in 2016, with 1.204 deals totalling 80 billion Euro. This trend was especially apparent in the Mid Size segment, where volumes were up +29.5% compared to the prior year. The financial sector saw the most number of deals, followed by construction. As for leveraged finance, in 2016 private equity funds made at least 125 investments in either Italian companies, directly or through firms in their portfolio, or businesses based abroad through Italian firms. All this resulted in an expenditure of more than 7 billion Euro. Most deals referred to SMEs. Approximately thirty of them involved companies with more than 100 million Euro in sales, and just ten concerned firms with more than 500 million Euro in revenues.
Short-term financing: short-term lending to businesses and professionals fell 5% from the end of 2014 in terms of loans approved and nearly 10% in terms of drawdowns. The decline in short-term loans was concentrated in current account overdraft facilities. The breakdown by amount shows a positive trend only in minor loans.
Pharma and Pharmacies: In the pharmaceutical industry, the payment of arrears owed by the Italian National Health Service to its suppliers is still a critical issue for Italy's public finances. At December 2016, there was more than 2,5 billion Euro in outstanding debt, concentrated mainly in Tuscany, Piedmont, Calabria, and Apulia. As for pharmacies, their number (currently 18.200) is expected to rise by approximately 2.500 as a result of the "Grow-Italy" decree. Prescription drugs account for 60% of pharmacies' turnover, while the remaining 40% is represented by over-the-counter products; parapharmaceuticals; cosmetics and personal care products; and dietary supplements.
Non-Performing Loans: NPLs referring to non-financial corporations remain steadily above 140 billion Euro, and also NPLs to producer households are stable at slightly below 16 billion Euro. NPLs have been rising as a proportion of loans, and are especially prevalent in the retail segment. As for the legal framework, the Italian government introduced a guarantee scheme for bad loan securitisations and reformed the NPL resolution process.
Tax receivables: In the first nine months of 2016, 10 thousand companies filed for bankruptcy. Insolvency proceedings are still at historically high levels, but were down 6% from the prior-year period when they had declined 3,8% compared to the first nine months of 2014. Non-bankruptcy workouts continued falling: they numbered 1,3 thousand between January and September 2016, down 32% year-over-year.
Funding: the trend in household and corporate deposits remains positive. Households are especially interested in time deposits, while businesses are increasingly setting aside funds for investments.
People1
1 The following data include in 2016 the scope of Interbanca S.p.A., which joined the IFIS Group in December 2016
People are key to accomplishing the Group's goals. Therefore, human resources management seeks to promote the competencies and skills of each individual and provide opportunities to fulfil their potential.
In this context, periodic performance appraisals are crucial: they focus on the person's set of behaviours, derived from the possession and implementation of theoretical knowledge, specialist know-how, skills, approaches and mindsets (such as professionalism, dedication, fairness, availability and initiative), and aim to help people develop as well as to identify skill training needs.
The appraisal is conducted in accordance with legal and contractual provisions, ensuring the assessments are fair as well as simply and clearly represented.
The Performanagement appraisal process is carried out once a year and involves the following steps:
Based on the result of the performance appraisal process, Banca IFIS rewards and acknowledges the best-performing employees and identifies which technical or management skills need to be consolidated or developed through training.
Banca IFIS commits to providing training to all employees and promoting participation in refresher courses and training programmes in order to help each individual fully realise his or her skills and expectations, and thus contribute towards the Group's goals.
Every year, based on the result of the performance appraisal process and the qualitative gaps identified by the Human Resources Strategic Plan, Banca IFIS designs, plans and implements a training programme for all employees (approved by the General Manager), monitoring actual employee participation and its effectiveness, placing special emphasis on mandatory training activities.
There are three types of training:
o IT security;
o privacy (Italian Legislative Decree 196/2003).
Based on the topic to explore and the target level of knowledge, Human Resources Development identifies the most effective and efficient training method. These methods include:
Based on the training needs emerged from the 2015 performance appraisal process, in 2016 Banca IFIS provided soft skill training as well as technical courses. It also provided mandatory and specific training courses to employees hired during the year in order to speed up the onboarding process as well as improve performance and the organizational climate. The most popular training methods in 2016 were E-learning, in-class training, and one-to-one training.
In 2016, the Bank placed special emphasis on including and promoting female talent through two training and awareness-raising initiatives: Leadership in action, a one-day course reserved for the middle management and attended by 26 participants , and the Diversity and Inclusion workshop, a two-day event attended by 16 employees.
| TRAINED EMPLOYEES | |||||
|---|---|---|---|---|---|
| 2016 | 2015 | ||||
| 86% (537) | 85% (597) | 1,134 | 84% (287) | 84% (322) | 609 |
| Men | |||||
| Women |
The IFIS Group refuses to adopt policies that discriminate against employees or applicants based on gender, age, religious or political beliefs and trade union affiliation, as well any form of nepotism and preferential treatment. All Group companies commit to ensuring that management and the heads of the individual business units treat their Employees fairly, guaranteeing their professional growth and fostering a workplace climate based on the principles of fairness and loyalty.
These principles shall apply at all stages of the company-employee relationship, from recruitment to hiring, the periodic performance appraisal, the access to training opportunities, remuneration and incentive schemes, and the end of the employment relationship.
As for remuneration policies, the analysis of the ratio of female-to-male pay shows limited differences for middle and senior managers and equality among clerical staff.
In addition, the Group's companies commit to protecting Employees who report unfair and/or illegal business practices as well as facilitating and promoting access to data and information relevant to any investigation. As the Parent Company, Banca IFIS, consistently with regulatory provisions and best practices, has established an internal reporting system that guarantees the privacy of all parties involved in any violation, also in order to protect the complainant from retaliation and discrimination.
In accordance with the guidelines in the Organisational and Management Model as per Italian Legislative Decree 231/01 and the "Consolidated Law on Workplace Health and Safety" (Italian Legislative Decree no. 81 of 2008), Banca IFIS has prepared an "Integrated Safety and Environment Manual" that defines its Safety Policy and the relevant procedures and adopts a system to ensure compliance with legal requirements and prevent the offences set out in Italian Legislative Decree no. 231/01.
The organisation responsible for health and safety is comprised of the Head of the Prevention and Protection Service (RSPP, Responsabile Servizio Prevenzione e Protezione in Italian), a Prevention and Protection Service Officer (ASPP, Addetto al Servizio di prevenzione e protezione in Italian), and two delegations of functions to the heads of Human Resources and General Services, as well as a series of managers and members of emergency and first aid teams. The Integrated Manual includes a Competency Matrix that outlines the roles and competencies of the various functions concerning health and safety with the aim of designing the relevant operational procedures. Ultimate responsibility for identifying and managing measures to protect employee health and safety lies with the General Manager.
Pursuant to applicable laws and the procedures in the Integrated Safety and Environment Manual, Banca IFIS identifies and assesses the risks employees are exposed to by preparing the Risk Assessment Document (DVR, Documento di Valutazione dei Rischi in Italian) and holds two meetings every year to inform the General Manager, Employee Safety Representatives and the Occupational Physician about the work carried out. During the year, continuous Safety Follow Ups and Audits—either conducted in-house by the RSPP or Internal Audit, or by external parties at the request of INAIL [Italy's National Institute for Insurance against Accidents at Work]—verify compliance with applicable laws and whether policies and programmes are being properly implemented.
The main initiatives carried out in 2016 concerned:
To support employees—especially those of the sales network—involved in criminal events, an "Emergency Plan" including information about what to do in the case of robberies, attacks or acts of sabotage is available on the Bank's intranet.
Another important issue is preventing health problems related to computer use and maintaining the same posture for long periods of time. In this regard, the Group provides (subject to medical prescription) lumbar pillows to improve workplace ergonomics and controls natural light with Venetian blinds to reduce glare on computer screens.
Here below is the Group's work injury rate for the last two year, broken down by type:
2 For more information, see the Report on Corporate Governance and Shareholding Structure (available at www.bancaifis.it).
The Board of Directors has all powers for the ordinary and extraordinary management of the Company, excluding only those reserved to the Shareholders' Meeting by law.
In addition, it approves the Environmental Policy, informing all workers about it, and delegates decisionmaking and spending authority to identify and manage the general measures to protect the health and safety of employees in the workplace.
Once a year, the Board of Directors receives a report on the activities carried out concerning employee health and safety and environmental protection, as well as a self-audit on the proper implementation of the Integrated Safety and Environment Manual.
The Control and Risks Committee, which provides advice and proposals concerning control operations, gives its opinion on the identification of the main corporate risks, including social and environmental risks (specifically, those related to corruption, the environment, and employee health and safety).
Banca IFIS's Organisation has actively participated in all the Bank's change management initiatives, supporting the business units in developing the potential of the reference markets as well as making operational processes more streamlined and efficient. During 2016, the Bank activated over 30 new projects, nearly ten of which were considered highly strategic.
The effort dedicated to the 12 areas of the project for the acquisition of the former Interbanca Group, as well as the preparations currently under way for the migration of Cedacri's Core Banking system, must be seen in this context.
In addition, consistently with its mission, the Organisation constantly oversees the Bank's regulatory framework, ensuring compliance with Supervisory provisions as well as support to the control functions in defining the required regulatory controls.
In 2016, the Operations department consolidated the radical organisational change that began in late 2015 with the aim of revising and innovating the operational model as well as technological solutions. The new organisation involved a significant increase in staff—especially in the ICT area, which saw an influx of experienced employees into middle management in order to help implement important change initiatives as well as of young new hires with specialist technology skills to develop new digital applications in-house. Through the ICT Strategic Plan prepared in accordance with the prudential supervisory provisions for Banks, the Operations department has charted a new way forward for the Bank in order to grow the size of the Business as well as offer new operational models based on Fintech. Therefore, the Bank made significant investments in rationalising the core banking systems in the medium term, leveraging leading Outsourcing solutions, as well as in developing digital solutions in-house to grow the Business of the Factoring, Non-Performing Loans and Digital Bank specialist areas, while maintaining an innovative and distinctive character. This entailed completing the initiatives to adopt digital native solutions, introducing ature processes and mobile tools to support customer interactions. In addition, Banca IFIS has launched a wide-ranging strategic initiative to advance the digitisation of its operational model further, centring it around the Salesforce platform. The goal is to reduce the time to market in developing the bundling of new products, enable mobile cross-selling processes, and overhaul the user experience for both Customers and employees by streamlining and automating processes. During the year, the Bank also introduced SAS-based Big Data tools and solutions, laying the foundations for the evolution of Data Warehouse and Analytics systems in order to support decision-making and risk control processes. In addition, in the last quarter of 2016 the Operations department supported Banca IFIS's extraordinary operations, which changed the Group's structure and will be key for the projects of the coming year.
The Group's overall risk governance and management structure is governed by the Risk Appetite Framework and the relevant documents, which are constantly updated based on the evolution of the Group's strategic framework. Concerning the recent acquisition, Banca IFIS is currently aligning and integrating risk governance and management methods while taking into account the peculiarities of each business (factoring, corporate finance, leasing, NPL).
Banca IFIS has prepared a Taxonomy of Risks describing how it identifies the existing and/or potential risks the Group could be exposed to in pursuing its strategic goals, and implements tools suited to prevent and mitigate each type of risk.
Concerning operational risks, Banca IFIS has defined and implemented a management and governance framework that involves structuring a robust Loss Data Collection process, which extends to its local network and the Polish subsidiary IFIS Finance, as well as conducting periodic Risk Self Assessments. As for the newly acquired entities of the Group, a process similar to the Parent Company's one was already in place. We are currently aligning performance metrics and assessment instruments.
As for credit risk referring to trade receivables, Banca IFIS uses an Internal Rating System for Italian businesses that was developed using proprietary databases and consists of:
• an "internal performance" module, monitoring the performance of the factoring relationships between the counterparty and the Bank—especially as far as the account debtor is concerned.
This rating is used also in credit monitoring as one of the drivers to identify early warnings.
The expansion of the company's scope required launching a wide-ranging project to overhaul counterparty rating models in order to make them consistent across the Group. The risk management structure will work on this project throughout 2017.
As for non-performing loans managed by the NPL Area as well as tax receivables, the Bank has enhanced the monitoring and control process concerning the portfolio's collection risk, thanks to technological solutions allowing to easily manage large data sets. This has made the relevant reporting set more robust as well as allowed to evaluate the performance of the credit assessment model.
Referring again to non-performing loans, Banca IFIS revised and implemented a new SAS-based model to assess positions subject to judicial collection processes for which the judge has issued a garnishment order.
Liquidity and interest rate risks are managed at the Group level (including the positions of the newly acquired companies), and the Bank is currently reviewing the governance and monitoring policy for such risks. The calculation of Basel 3 indicators is now fully operational, including the calculation of the two liquidity ratios: Liquid Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).
As for reputational risk, which potentially concerns most of the Bank's operational units, we have considered both external and internal factors as well as specific events concerning the individual operational units that could damage the Group's reputation in order to assess their impact. These factors include, for instance, employee dissatisfaction and turnover as well as accidents due to the failure to comply with health and safety regulations.
To ensure the Bank conducts its operations transparently and fairly, thus preserving its institutional role and image as well as meeting the expectations of shareholders and stakeholders, Banca IFIS has adopted an Organisational and Management model pursuant to Italian Legislative Decree 231/2001.
This Model allows to raise the awareness of the Bank's employees about the need to act fairly and properly in the discharge of their duties so as to prevent the risk of committing the offences listed in Italian Legislative Decree 231/2001 (including – among other things – corruption between private persons, environmental crimes, and offences associated with the failure to comply with workplace health and safety regulations).
A key part of the Organisational Model is the Code of Ethics, which sets out the Bank's rights, duties and responsibilities relative to all parties it engages with (customers, suppliers, employees, shareholders, supervisory authorities, institutions).
The Code of Ethics establishes the rules of conduct that employees must observe in day-to-day operations in compliance with applicable laws and regulations in all Countries where the Bank operates.
3 The following data include in 2016 the scope of Interbanca S.p.A., which joined the IFIS Group in December 2016.
The Code establishes reference standards and rules of conduct designed to reinforce corporate decision-making processes and guide the conduct of all employees, thus making it a tool for promoting "corporate business ethics".
Therefore, adopting and effectively implementing the Model and all the instruments associated with it improves the Bank's Corporate Governance, limiting the risk of committing offences as well as of damaging its image and reputation by ensuring a responsible and conscientious attitude towards all counterparties4.
Ensuring the Organisational Model and the Code of Ethics are effective requires promoting a "culture of control" among all employees and raising the awareness of all structures concerned. This is why the Group trains its staff on the content of the Organisational Model pursuant to Italian Legislative Decree 231/01 and the Code of Ethics.
| 2015 | 2016 | ||
|---|---|---|---|
| Total employees | Num | 704 | 1.313 |
| 239 | 766 | ||
| Total employees trained, of which: | % | 34% | 58% |
| Num | 2 | 36 | |
| - Senior managers | % | 8% | 57% |
| Num | 27 | 229 | |
| - Middle managers | % | 17% | 58% |
| Num | 210 | 501 | |
| - Clerical staff | % | 40% | 59% |
| 2015 | 2016 | ||
|---|---|---|---|
| Total training hours, of which: | hh | 417 | 1.599 |
| - Senior managers | hh | 3 | 84 |
| - Middle managers | hh | 29 | 495,5 |
| - Clerical staff | hh | 385 | 1.019,5 |
In addition, in accordance with the "Supervisory provisions for banks" - Circular no. 285 of 17 December 2013, Banca IFIS has activated an internal reporting system to allow the employees of the Parent Company or Subsidiaries to report actions or events that potentially breach the regulations (both external and internal) governing the company's operations.
The reports can be submitted using different channels5 and are handled by the Internal Auditing Officer, who examines and investigates them based on the principles of impartiality, privacy, dignity of the employee and protection of personal data. After completing the investigation, the Internal Auditing Officer formally submits his or her assessment to the Chief Executive Officer and the General Manager (or the
4 For more information on risk governance and the internal control system, see the Notes – Part E - Information on risks and risk management policies as well as the Report on Corporate Governance and Shareholding Structure (available at www.bancaifis.it).
5 Employees can submit reports using a dedicated e-mail address, second-class post or internal mail, in person, or through an application available on the company's portal (IFIS4YOU) as well as the institutional website (www.bancaifis.it).
Chairman of the Board of Statutory Auditors in the event of potential incompatibilities), who will decide what corrective actions need to be carried out.
In December 2016, the Group updated its Reporting Policy to extend it also to Interbanca.
The most significant direct environmental impacts of Banca IFIS's operations are the production of waste—mainly office waste (paper, empty toner cartridges, out-of-use equipment, etc.)—wastewater, the energy used for lighting and heating, and the emissions into the atmosphere. There are also additional impacts, such as the use and disposal of agrochemicals, associated with the maintenance of the Villa Fürstenberg garden—a 22-hectare green area that surrounds the company's historical headquarters (and the current head office) in Mestre, Venice.
As part of the implementation of the Organisational Model pursuant to Italian Legislative Decree 231/01 and in order to prevent environmental offences, Banca IFIS has prepared an "Integrated Safety and Environment Manual". The Manual, approved by the Board of Directors and regularly updated, lists all procedures for managing environmental as well as health and safety impacts (in accordance with Italian Legislative Decree no. 152 of 3 April 2006). The Head Office is responsible for promoting the implementation of the Manual and regularly updating the Environmental Policy, while the Equipment and Safety/Environment Management Unit, which is part of the General Services Function, is responsible for ensuring environmental procedures are properly implemented.
The Manual, which includes the Group's Environmental Policy, is also the instrument the company uses to establish and inform all employees about the key principles and criteria for making decisions about protecting the environment. Banca IFIS endeavours to disseminate and consolidate a culture of environmental protection, raising awareness of environmental issues and promoting responsible practices among all employees. These are provided with adequate information and training, and they are required to report any deficiencies or failures to comply with applicable regulations in a timely manner.
The Group manages the impacts generated by its operations in accordance with the Integrated Manual and applicable laws.
Concerning the reduction in energy consumption, in 2016 the restructuring of the Florence office housing the NPL (Non-Performing Loans) Area and the Fast Finance business area—was completed. The restructuring is environmentally friendly and will allow to reduce consumption through the energy generated with solar panels as well as the savings from Led lighting.
The initiatives the Banca IFIS Group carries out with local communities show its willingness to serve companies by promoting a culture of entrepreneurship—including for non-profit purposes.
In addition, there are also charity projects that often directly involve employees. These refer to associations in the communities where the company operates: the Bank hosts initiatives and events for the public or the business community on its premises.
Here below are the main projects and initiatives carried out during 2016.
Botteghe Digitali is a project Banca IFIS developed with Stefano Micelli, a Professor at Venice's Cà Foscari University, and Marketing Arena. It seeks to help deserving companies—which are not necessarily Banca IFIS's customers—establish themselves on the market and boost their competitiveness while preserving the characteristics of the made-in-Italy brand that makes them special. www.botteghedigitali.it
The New Craft Club is a community based on the principle of exchanging and discussing experiences and knowledge concerning the digitisation, information and presentation of the best Made in Italy companies. In 2016, many of them were featured in the New Craft show of the Triennale di Milano's 21st International Exhibition—an event Banca IFIS supported as exhibition partner.
The Club seeks to create an environment in which companies can discuss and learn about specialist issues associated with the needs or evolution of the market, and that could potentially serve as an observatory for the trends concerning the digitisation of craft businesses with the help of public officials, researchers, market participants, and consultants. (Go to http://www.newcraftclub.it
"The Made in Italy meets the digital" is an interactive study of the digitisation of craft businesses conducted by Fondazione Nord Est and supported by Banca IFIS.
The study sought to measure the penetration of certain digital manufacturing technologies—specifically, laser, 3D printing, robotics, e-commerce, and the web—among Italian businesses. 787 Made in Italy consumer companies operating in three sectors—housing, fashion, and jewellery—participated in the survey. http://madeinitaly.newcraftclub.it/
In 2016, the former Interbanca Group supported the study—conducted by Professors Paolo Gubitta and Diego Campagnolo (University of Padua) with Doxa, which surveyed 300 executives and senior leaders—on mid-market companies, i.e. Italian businesses with a turnover between 5 and 250 million Euro.
In 2016, the study focused only on the Italian market and was carried out in partnership with
It emerged that Italian companies are still reluctant to use advanced financing options because of a cultural lag or the lack of specific competencies. The segment therefore represents a wide and untapped potential market for financial products such as factoring, leasing, and structured finance.
The CEO School programme, launched in April 2016, is an advanced training course created by Valore D and the former Interbanca Group inspired by the belief that greater gender diversity can help improve business results. It seeks to allow an increasing number of women to work in executive positions.
The programme is offered to 30 female top managers selected for a monthly training course that ends in February 2017.
In 2016, Banca IFIS supported Mestre's "Festival of Politics", which focuses on the main Italian and international political, economic and social issues. In September 2016, Banca IFIS CEO Giovanni Bossi attended the Festival and had a conversation with Dario Di Vico, a journalist for the newspaper Il Corriere della Sera, on the topic "Economic crisis and political splintering".
Banca IFIS has been working for several years now with Associazione Amici del Cuore, a non-profit organisation that promotes initiatives concerning preventive healthcare, secondary rehabilitation and healthcare education as well as supports research in cardiovascular diseases. The Bank has donated funds to the Association in 2014 and 2015 and conducted joint initiatives in 2016.
The Bank's employees participated in a preventive healthcare initiative in which they received a free electrocardiogram at the Head Office in Mestre (216 participants). The data collected was made available to the Association as a data base for research purposes. In addition, in 2016 Banca IFIS supported the World Heart Day, an event that promotes preventive healthcare organised by the Association in partnership with the Municipality of Venice.
Banca IFIS decided to make the Christmas holidays an opportunity for charity by reserving part of the budget usually dedicated to company parties for a project in partnership with the ABIO (Assistenza Bambini in Ospedale, Aid for Hospitalised Children) Association of Mestre and Milan, which operates in the paediatric units of Italian hospitals. The Bank's donation allowed to buy toys and other goods to aid the recovery of children and their families. The initiative was also an opportunity for company volunteering: 102 employees (across Banca IFIS and the former Interbanca Group) contributed directly to the initiative, for instance by delivering the gifts at the hospital.
In 2016, the annual macro-regional meeting of the NPL Area's CrediFamiglia Agent Network became a charity team building event. The initiative was held in Rome and saw teams of agents work with a street artist: the team was tasked with help 'their street artist' engage passers-by to persuade them to make a donation to the non-profit organisation Save The Children.
In 20166 , the Banca IFIS Group generated 920,6 million Euro in economic value. The breakdown of the generated economic value7 represents the wealth the Group generated during the year and how this is reinvested in the Bank or distributed to the stakeholders with which the Group engages in its day-today operations.
Therefore, the analysis of the value generated and distributed shows in monetary terms the relationships between the Banking Group and the socio-economic system it engages with—and especially its main stakeholders:
The total economic value withheld totalled 650,1 million Euro, compared to 129,1 million Euro in December 2015: the significant increase was essentially attributable to the 623,6 million Euro gain on bargain purchase recognised in profit or loss following the acquisition of the former GE Capital Interbanca Group on 30 November 2016. This shows that the acquisition has significantly strengthened the financial position of the Banking Group, which will allow to support its growth in the long term.
| (in thousands of Euro) | 2015 | 2016 | 2015 - % | 2016 - % |
|---|---|---|---|---|
| TOTAL ECONOMIC VALUE GENER ATED |
376.734,4 | 920.584 | 100% | 100% |
| TOTAL ECONOMIC VALUE DISTRIB UTED |
-247.620,6 | -270.529 | 66% | 29% |
| SUPPLIERS | -55.444 | -74.053 | 15% | 8% |
| EMPLOYEES AND COLLABORATORS | -62.954 | -93.402 | 17% | 10% |
| SHAREHOLDERS AND THIRD PARTIES | -40.342 | -43.813 | 11% | 5% |
| ITALIAN STATE, AUTHORITIES AND IN STITUTIONS, COMMUNITY |
-88.880,6 | -58.675 | 24% | 6% |
| TOTAL ECONOMIC VALUE WITHHELD | -129.113,6 | -650.055 | 34% | 71% |
ECONOMIC VALUE GENERATED AND DISTRIBUTED
6 The data include in 2016 the scope of Interbanca S.p.A., which joined the IFIS Group in December 2016.
7 The breakdown is made by restating the items of the income statement used in the Consolidated Financial Statements. The statement below was therefore prepared based on the 2016 and 2015 Consolidated Income Statements and in accordance with the relevant guidelines issued by the Italian Banking Association.
Here are the events that should be considered when comparing the results to previous periods:
Acquisition of the former GE Capital Interbanca Group: on 30 November 2016, after obtaining the authorisations of the competent Supervisory Authorities, Banca IFIS acquired 99,99% of the former GE Capital Interbanca S.p.A. Following the acquisition, in accordance with IASs/IFRSs, Banca IFIS conducted a Purchase Price Allocation, which consists in allocating the cost of the business combination, recognising the assets acquired, liabilities assumed, and contingent liabilities at their fair values at the acquisition date. This process resulted in a 623,6 million Euro gain on bargain purchase, which was recognised in profit or loss under other operating income. The details of the transaction are presented in part G of the Notes to the Consolidated Financial Statements.
Following the acquisition of the former GE Capital Interbanca Group, Banca IFIS has identified the new Corporate Banking and Leasing sectors. For more details, see Contribution of business segments in this Directors' Report.
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | AMOUNTS AT | CHANGE | ||
|---|---|---|---|---|
| HIGHLIGHTS (in thousands of Euro) | 31.12.2016 | 31.12.2015 | ABSOLUTE | % |
| Available for sale financial assets | 374.229 | 3.221.533 | (2.847.304) | (88,4)% |
| Due from banks | 1.393.358 | 95.352 | 1.298.006 | 1361,3% |
| Loans to customers | 5.928.212 | 3.437.136 | 2.491.076 | 72,5% |
| Total assets | 8.699.145 | 6.957.720 | 1.741.425 | 25,0% |
| Due to banks | 503.964 | 662.985 | (159.021) | (24,0)% |
| Due to customers | 5.045.136 | 5.487.476 | (442.340) | (8,1)% |
| Equity | 1.218.783 | 573.467 | 645.316 | 112,5% |
| RECLASSIFIED CONSOLIDATED INCOME STATEMENT | YEAR | CHANGE | ||
|---|---|---|---|---|
| HIGHLIGHTS (1) (in thousands of Euro) | 2016 | 2015 | ABSOLUTE | % |
| Net banking income (1) | 325.971 | 404.345 | (78.374) | (19,4)% |
| Net value adjustments on receivables and other financial as sets (1) |
(26.605) | (30.637) | 4.032 | (13,2)% |
| Net profit (loss) from financial activities | 299.366 | 373.708 | (74.342) | (19,9)% |
| Operating costs net of the gain on bargain purchase | (202.475) | (128.119) | (74.356) | 58,0% |
| Bargain | 623.635 | - | 623.635 | 0,0% |
| Group gross profit for the period | 720.526 | 245.589 | 474.937 | 193,4% |
| Group net profit for the period | 687.985 | 161.966 | 526.019 | 324,8% |
1) Net value adjustments in the NPL Area, totalling 32,6 million Euro at 31 December 2016 compared to 3,6 million Euro at 31 December 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
| RECLASSIFIED QUARTERLY CONSOLIDATED INCOME | 4th QUARTER | CHANGE | |||
|---|---|---|---|---|---|
| STATEMENT HIGHLIGHTS (1) (in thousands of Euro) | 2016 | 2015 | ABSOLUTE | % | |
| Net banking income (1) | 88.282 | 76.208 | 12.074 | 15,8% | |
| Net value adjustments on receivables and other financial assets (1) | (7.113) | (7.505) | 392 | (5,2)% | |
| Net profit (loss) from financial activities | 81.169 | 68.703 | 12.466 | 18,1% | |
| Operating costs | 539.858 | (47.335) | 587.193 | (1240,5)% | |
| Group gross profit for the period | 621.027 | 21.368 | 599.659 | 2806,3% | |
| Group net profit for the period | 621.716 | 13.161 | 608.555 | 4623,9% |
1) Net value adjustments in the NPL Area, totalling 9,0 million Euro in the 4th quarter of 2016 and 0,6 million Euro in the 4th quarter of 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
Here below are the normalised highlights:
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | AMOUNTS AT | CHANGE | ||
|---|---|---|---|---|
| HIGHLIGHTS (in thousands of Euro) | 31.12.2016 NORMALISED |
31.12.2015 NORMALISED |
ABSOLUTE | % |
| Available for sale financial assets | 325.050 | 3.221.533 | (2.896.483) | (89,9)% |
| Due from banks | 1.194.420 | 95.352 | 1.099.068 | 1152,6% |
| Loans to customers | 3.638.176 | 3.437.136 | 201.040 | 5,8% |
| Total assets | 5.461.443 | 6.957.720 | (1.496.277) | (21,5)% |
| Due to banks | 509.066 | 662.985 | (153.919) | (23,2)% |
| Due to customers | 4.095.416 | 5.487.476 | (1.392.060) | (25,4)% |
| Equity | 619.921 | 573.467 | 46.454 | 8,1% |
| RECLASSIFIED CONSOLIDATED INCOME STATEMENT | YEAR | CHANGE | |||
|---|---|---|---|---|---|
| HIGHLIGHTS (1) (in thousands of Euro) | 2016 NORMALISED |
2015 NORMALISED |
ABSOLUTE | % | |
| Net banking income (1) | 331.962 | 279.845 | 52.117 | 18,6% | |
| Net value adjustments on receivables and other financial as sets (1) |
(25.023) | (30.637) | 5.614 | (18,3)% | |
| Net profit (loss) from financial activities | 306.939 | 249.208 | 57.731 | 23,2% | |
| Operating costs | (172.161) | (128.119) | (44.042) | 34,4% | |
| Group gross profit for the period | 134.778 | 121.089 | 13.689 | 11,3% | |
| Group net profit for the period | 89.795 | 78.638 | 11.157 | 14,2% |
1) Net value adjustments in the NPL Area, totalling 32,6 million Euro at 31 December 2016 compared to 3,6 million Euro at 31 December 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
| RECLASSIFIED QUARTERLY CONSOLIDATED INCOME | 4th QUARTER | CHANGE | |||
|---|---|---|---|---|---|
| STATEMENT HIGHLIGHTS (1) (in thousands of Euro) | 2016 NORMALISED |
2015 NORMALISED |
ABSOLUTE | % | |
| Net banking income (1) | 94.273 | 76.208 | 18.065 | 23,7% | |
| Net value adjustments on receivables and other financial assets (1) | (5.531) | (7.505) | 1.974 | (26,3)% | |
| Net profit (loss) from financial activities | 88.742 | 68.703 | 20.039 | 29,2% | |
| Operating costs | (53.463) | (47.335) | (6.128) | 12,9% | |
| Group gross profit for the period | 35.279 | 21.368 | 13.911 | 65,1% | |
| Group net profit for the period | 23.526 | 13.161 | 10.365 | 78,8% |
1) Net value adjustments in the NPL Area, totalling 9,0 million Euro in the 4th quarter of 2016 and 0,6 million Euro in the 4th quarter of 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
| YEAR | CHANGE | ||
|---|---|---|---|
| RECLASSIFIED(1) GROUP KPIs | 2016 | 2015 | % |
| ROE | 98,5% | 30,4% | 68,1% |
| ROA | 8,3% | 3,5% | 4,8% |
| ROCA | 8,5% | 1,5% | 7,0% |
| Total Own Funds Capital Ratio | 15,3% | 14,9%(2) | 0,4% |
| Common Equity Tier 1 Ratio | 14,7% | 14,2%(2) | 0,5% |
| Number of company shares (in thousands) | 53.811 | 53.811 | 0,0% |
| Number of shares outstanding at period end(3) (in thousands) | 53.431 | 53.072 | 0,7% |
| Book per share | 22,81 | 10,81 | 111,0% |
| EPS | 12,94 | 3,05 | 324,3% |
| Dividend per share | 0,82 | 0,76 | 7,9% |
| Payout ratio | 6,4% | 24,9% | (18,5)% |
(1) Net value adjustments on receivables of the NPL Area, totalling 32,6 million Euro at 31 December 2016 compared to 3,6 million Euro at 31 December 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
(2) Total consolidated own funds (amounting to 486.809 thousands Euro) differ from the amount reported in the consolidated financial statements for the year ended 31 December 2015 (501.809 thousands Euro) due to the 15 million Euro dividend payout approved by the Shareholders' Meeting of the parent company La Scogliera S.p.A. on 23 March 2016. The consolidated supervisory reports at 31 December 2015, as well as the relevant capital adequacy ratios, had already been adjusted at the end of March 2016 to account for said dividend payout. The data on consolidated Own Funds and capital adequacy ratios account for the impact of said distribution.
(3) Outstanding shares are net of treasury shares held in the portfolio.
| NORMALISED RECLASSIFIED(1) GROUP KPIs | YEAR | CHANGE | |
|---|---|---|---|
| 2016 | 2015 | % | |
| ROE | 15,5% | 16,3% | (0,8)% |
| ROA | 2,5% | 1,7% | 0,8% |
| ROCA | 2,4% | 1,5% | 0,9% |
| Cost/Income ratio | 51,9% | 45,8% | 6,1% |
| Book per share | 11,60 | 9,24 | 25,5% |
| EPS | 1,69 | 1,48 | 14,2% |
| Dividend per share | 0,82 | 0,76 | 7,9% |
| Payout ratio | 48,8% | 51,3% | (2,5)% |
(1) Net value adjustments on receivables of the NPL Area, totalling 32,6 million Euro at 31 December 2016 compared to 3,6 million Euro at 31 December 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
| STATEMENT OF FINANCIAL POSITION (in thousands of Euro) |
TRADE RECEIVA BLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TOTAL |
|---|---|---|---|---|---|---|---|
| Available for sale financial assets | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 374.229 | 374.229 |
| Amounts at 31.12.2015 | - | - | - | - | - | 3.221.533 | 3.221.533 |
| % Change | - | - | - | - | - | (88,4)% | (88,4)% |
| Due from banks | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 1.393.358 | 1.393.358 |
| Amounts at 31.12.2015 | - | - | - | - | - | 95.352 | 95.352 |
| % Change | - | - | - | - | - | 1361,3% | 1361,3% |
| Loans to customers | |||||||
| Amounts at 31.12.2016 | 3.092.488 | 905.682 | 1.235.638 | 562.146 | 124.697 | 7.561 | 5.928.212 |
| Amounts at 31.12.2015 | 2.848.124 | n.a. | n.a. | 354.352 | 130.663 | 103.997 | 3.437.136 |
| % Change | 8,6% | n.a. | n.a. | 58,6% | (4,6)% | (92,7)% | 72,5% |
| Due to banks | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 503.964 | 503.964 |
| Amounts at 31.12.2015 | - | - | - | - | - | 662.985 | 662.985 |
| % Change | - | - | - | - | - | (24,0)% | (24,0)% |
| Due to customers | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 5.045.136 | 5.045.136 |
| Amounts at 31.12.2015 | - | - | - | - | - | 5.487.476 | 5.487.476 |
| % Change | - | - | - | - | - | (8,1)% | (8,1)% |
| RECLASSIFIED DATA ON THE INCOME STATEMENT (1) (in thousands of Euro) |
TRADE RE CEIVABLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TO TAL |
|---|---|---|---|---|---|---|---|
| Net banking income | |||||||
| Amounts at 31.12.2016 | 174.433 | 2.952 | (1.172) | 154.740 | 13.990 | (18.972) | 325.971 |
| Amounts at 31.12.2015 | 158.671 | n.a. | n.a. | 52.687 | 20.335 | 172.652 | 404.345 |
| % Change | 9,9% | n.a. | n.a. | 193,7% | (31,2)% | (111,0)% | (19,4)% |
| Net profit (loss) from financial activi ties |
|||||||
| Amounts at 31.12.2016 | 154.128 | 2.889 | (2.682) | 154.740 | 13.620 | (23.329) | 299.366 |
| Amounts at 31.12.2015 | 137.423 | n.a. | n.a. | 52.687 | 19.923 | 163.675 | 373.708 |
| % Change | 12,2% | n.a. | n.a. | 193,7% | (31,6)% | (114,3)% | (19,9)% |
(1) Net value adjustments on receivables of the NPL Area, totalling 32,6 million Euro at 31 December 2016 compared to 3,6 million Euro at 31 December 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
| RECLASSIFIED QUARTERLY DATA ON THE INCOME STATE MENT (1) (in thousands of Euro) |
TRADE RECEIVA BLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TO TAL |
|---|---|---|---|---|---|---|---|
| Net banking income | |||||||
| Fourth quarter 2016 | 53.142 | 2.952 | (1.172) | 42.780 | 3.126 | (12.546) | 88.282 |
| Fourth quarter 2015 | 39.728 | n.a. | n.a. | 21.818 | 8.828 | 5.834 | 76.208 |
| % Change | 33,8% | - n.a. |
- n.a. |
96,1% | (64,6)% | (315,0)% | 15,8% |
| Net profit (loss) from financial activi ties |
|||||||
| Fourth quarter 2016 | 48.061 | 2.889 | (2.682) | 42.780 | 3.025 | (12.904) | 81.169 |
| Fourth quarter 2015 | 33.237 | n.a. | n.a. | 21.818 | 8.542 | 5.106 | 68.703 |
| % Change | 44,6% | - n.a. |
n.a. | 96,1% | (64,6)% | (352,7)% | 18,1% |
(1) Net value adjustments in the NPL Area, totalling 9,0 million Euro in the 4th quarter of 2016 and 0,6 million Euro in the 4th quarter of 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
| SEGMENT KPIs (in thousands of Euro) |
TRADE RE CEIVABLES |
CORPORATE BANKING |
LEASING | NPL AREA | TAX RECEIV ABLES |
GOVERN ANCE AND SERVICES |
|---|---|---|---|---|---|---|
| Turnover | ||||||
| Amounts at 31.12.2016 | 10.549.881 | n.a. | n.a. | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 10.126.397 | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 4,2% | - | - | - | - | - |
| Nominal amount of receivables man aged |
||||||
| Amounts at 31.12.2016 | 3.880.835 | 1.739.175 | 1.273.933 | 9.660.196 | 172.145 | n.a. |
| Amounts at 31.12.2015 | 3.576.982 | n.a. | n.a. | 8.161.005 | 190.553 | n.a. |
| % Change | 8,5% | - | - | 18,4% | (9,7)% | - |
| Cost of credit quality | ||||||
| Amounts at 31.12.2016 | 0,8% | 0,1% | 1,5% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 0,9% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (0,1)% | n.a. | n.a. | - | - | - |
| Net bad loans/Loans to customers | ||||||
| Amounts at 31.12.2016 | 1,0% | 3,0% | 0,5% | 57,0% | 0,0% | n.a. |
| Amounts at 31.12.2015 | 1,1% | n.a. | n.a. | 45,0% | 0,0% | n.a. |
| % Change | (0,1)% | n.a. | n.a. | 12,1% | 0,0% | - |
| Net bad loans/Equity | ||||||
| Amounts at 31.12.2016 | 2,6% | 2,2% | 0,5% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 5,4% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (2,8)% | n.a. | n.a. | - | - | - |
| Coverage ratio on gross bad loans | ||||||
| Amounts at 31.12.2016 | 88,5% | 94,0% | 92,2% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 87,9% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 0,7% | n.a. | n.a. | - | - | - |
| Non-performing exposures/Loans to customers |
||||||
| Amounts at 31.12.2016 | 6,5% | 19,0% | 3,0% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 4,5% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 2,0% | n.a. | n.a. | - | - | - |
| Net non-performing loans/Equity | ||||||
| Amounts at 31.12.2016 | 16,5% | 14,1% | 3,0% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 22,4% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (6,0)% | n.a. | n.a. | - | - | - |
| RWA | ||||||
| Amounts at 31.12.2016 | 2.348.131 | 929.337 | 875.153 | 562.146 | 50.004 | 263.512(4) |
| Amounts at 31.12.2015 | 1.970.886 | n.a. | n.a. | 354.352 | 41.614 | 25.256 |
| % Change | 19,1% | n.a. | n.a. | 58,6% | 20,2% | 943,4% |
(1) Gross flow of the receivables sold by the customers in a specific period of time.
(2) Risk Weighted Assets; the amount refers exclusively to the financial items reported in the segments.
(3) Data restated after initial publication.
(4) The Governance and Services sector's RWAs include in 2016 the investment in IFIS Rental Services, a non-financial company consolidated using the equity method and that is not part of the Banking Group for supervisory purposes.
| RECLASSIFIED CONSOLIDATED | YEAR 2016 | YEAR 2015 | ||||||
|---|---|---|---|---|---|---|---|---|
| STATEMENT OF FINANCIAL POSITION: QUARTERLY EVOLUTION (in thousands of Euro) |
31.12 | 30.09 | 30.06 | 31.03 | 31.12 | 30.09 | 30.06 | 31.03 |
| ASSETS | ||||||||
| Available for sale financial assets | 374.229 | 1.026.744 1.027.770 | 1.066.413 | 3.221.533 3.677.850 | 3.803.216 | 5.069.781 | ||
| Due from banks | 1.393.358 | 454.170 | 153.877 | 114.691 | 95.352 | 246.991 | 114.843 | 115.697 |
| Loans to customers | 5.928.212 | 3.303.322 3.355.998 | 3.307.793 | 3.437.136 3.176.172 | 3.152.145 | 2.921.902 | ||
| Property, plant and equipment | 110.348 | 62.291 | 56.729 | 53.792 | 52.163 | 52.137 | 51.509 | 51.329 |
| Intangible assets | 14.981 | 10.816 | 8.929 | 7.391 | 7.170 | 7.031 | 6.779 | 6.772 |
| Other assets | 878.017 | 138.256 | 139.895 | 112.110 | 144.366 | 84.507 | 92.902 | 77.104 |
| Total assets | 8.699.145 | 4.995.599 4.743.198 | 4.662.190 | 6.957.720 | 7.244.688 | 7.221.394 | 8.242.585 |
| RECLASSIFIED CONSOLIDATED | YEAR 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| STATEMENT OF FINANCIAL POSITION: QUAR TERLY EVOLUTION (in thousands of Euro) |
31.12 | 30.09 | 30.06 | 31.03 | 31.12 | 30.09 | 30.06 | 31.03 |
| LIABILITIES | ||||||||
| Due to banks | 503.964 | 56.788 | 43.587 | 182.568 | 662.985 | 537.898 | 457.384 | 200.953 |
| Due to customers | 5.045.136 4.138.865 3.928.261 | 3.722.501 | 5.487.476 | 5.900.458 | 6.037.552 | 7.241.379 | ||
| Outstanding securities | 1.488.556 | - | - | - | - | - | - | - |
| Post-employment benefits | 7.660 | 1.554 | 1.545 | 1.510 | 1.453 | 1.388 | 1.407 | 1.641 |
| Tax liabilities | 24.925 | 15.116 | 16.180 | 25.118 | 25.549 | 23.904 | 18.207 | 67.692 |
| Other liabilities | 410.121 | 196.628 | 191.428 | 180.250 | 206.790 | 224.028 | 182.578 | 159.042 |
| Equity: | 1.218.783 | 586.648 | 562.197 | 550.243 | 573.467 | 557.012 | 524.266 | 571.878 |
| - Share capital, share premiums and reserves |
530.838 | 520.379 | 523.077 | 528.198 | 411.501 | 408.207 | 393.487 | 545.649 |
| - Profit for the period | 687.945 | 66.269 | 39.120 | 22.045 | 161.966 | 148.805 | 130.779 | 26.229 |
| Total liabilities and equity |
8.699.145 4.995.599 4.743.198 | 4.662.190 | 6.957.720 | 7.244.688 | 7.221.394 | 8.242.585 |
| RECLASSIFIED CONSOLIDATED INCOME | YEAR 2016 | YEAR 2015 | ||||||
|---|---|---|---|---|---|---|---|---|
| STATEMENT (1) QUARTERLY EVOLUTION (in thousands of Euro) |
4th Q. | 3rd Q. | 2nd Q. | 1st Q. | 4th Q. | 3rd Q. | 2nd Q. | 1st Q. |
| Net interest income | 78.510 | 52.988 | 55.395 | 57.707 | 45.312 | 48.163 | 53.432 | 58.106 |
| Net commission income | 1.060 | 13.087 | 13.316 | 13.648 | 14.824 | 14.712 | 14.878 | 14.369 |
| Net result from trading | 4 | (374) | (86) | (246) | (55) | (179) | 36 | 120 |
| Gain/loss on sale or buyback of: | 17.753 | 21.065 | 5.694 | 5.495 | 16.127 | - | 124.500 | - |
| loans and receivables | 17.770 | 21.065 | 5.694 | - | 14.948 | - | - | - |
| available for sale financial assets | (17) | - | - | 5.495 | 1.179 | - | 124.500 | - |
| Net banking income | 97.327 | 86.766 | 74.319 | 76.604 | 76.208 | 62.696 | 192.846 | 72.595 |
| Net impairment losses/reversal on | (16.158) | (3.731) | (7.496) | (8.265) | (7.505) | (5.463) | (10.183) | (7.486) |
| loans and receivables | (15.806) | (3.731) | (6.449) | (5.313) | (6.777) | (1.447) | (7.969) | (5.467) |
| available for sale financial assets | (357) | - | (1.047) | (2.952) | (728) | (4.016) | (2.214) | (2.019) |
| other financial transactions | 5 | - | - | - | - | - | - | - |
| Net profit (loss) from financial activities | 81.169 | 83.035 | 66.823 | 68.339 | 68.703 | 57.233 | 182.663 | 65.109 |
| Personnel expenses | (23.959) | (14.324) | (14.187) | (13.408) | (12.266) | (12.394) | (12.165) | (11.517) |
| Other administrative expenses | (55.775) | (24.029) | (28.051) | (18.421) | (35.419) | (15.956) | (11.411) | (16.042) |
| Net allocations to provisions for risks and charges |
1.611 | (1.827) | 2.157 | (3.790) | 13 | (160) | 397 | (479) |
| Net value adjustments on property, plant and equipment and intangible assets |
(2.742) | (1.306) | (1.069) | (938) | (1.045) | (942) | (927) | (832) |
| Other operating income/expenses | 620.723 | (415) | 162 | 748 | 1.382 | 478 | (2.141) | 3.307 |
| Operating costs | 539.858 | (41.901) | (40.988) | (35.809) | (47.335) | (28.974) | (26.247) | (25.563) |
| Pre-tax profit from continuing operations | 621.027 | 41.134 | 25.835 | 32.530 | 21.368 | 28.259 | 156.416 | 39.546 |
| Income tax expense for the period | 689 | (13.985) | (8.760) | (10.485) | (8.207) | (10.233) | (51.866) | (13.317) |
| Profit for the period | 621.716 | 27.149 | 17.075 | 22.045 | 13.161 | 18.026 | 104.550 | 26.229 |
| Non-controlling interests | 40 | - | - | - | - | - | - | - |
| Parent Company profit for the year | 621.676 | 27.149 | 17.075 | 22.045 | 13.161 | 18.026 | 104.550 | 26.229 |
(1) Net value adjustments on NPL Area receivables were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
| INCOME STATEMENT DATA BY | YEAR 2016 | YEAR 2015 | ||||||
|---|---|---|---|---|---|---|---|---|
| SEGMENT: QUARTERLY EVOLUTION (in thousands of Euro) |
4th Q. | 3rd Q. | 2nd Q. | 1st Q. | 4th Q. | 3rd Q. | 2nd Q. | 1st Q. |
| Net banking income | 88.282 | 86.766 | 74.319 | 76.604 | 76.208 | 62.696 | 192.846 | 72.595 |
| Trade Receivables | 53.142 | 39.910 | 40.065 | 41.316 | 39.728 | 41.668 | 37.941 | 39.334 |
| Corporate Banking | 2.952 | - | - | - | - | - | - | - |
| Leasing | (1.172) | - | - | - | - | - | - | - |
| NPL Area | 42.780 | 50.822 | 35.198 | 25.940 | 21.818 | 10.676 | 11.334 | 8.859 |
| Tax Receivables | 3.126 | 2.838 | 3.873 | 4.153 | 8.828 | 3.984 | 3.621 | 3.902 |
| Governance and Services | (12.546) | (6.804) | (4.817) | 5.195 | 5.834 | 6.368 | 139.950 | 20.500 |
| Net profit from financial activities | 81.169 | 83.035 | 66.823 | 68.339 | 68.703 | 57.233 | 182.663 | 65.109 |
| Trade Receivables | 48.061 | 36.261 | 33.803 | 36.003 | 33.237 | 40.361 | 30.016 | 33.809 |
| Corporate Banking | 2.889 | - | - | - | - | - | - | - |
| Leasing | (2.682) | - | - | - | - | - | - | - |
| NPL Area | 42.780 | 50.822 | 35.198 | 25.940 | 21.818 | 10.676 | 11.334 | 8.859 |
| Tax Receivables | 3.025 | 2.756 | 3.686 | 4.153 | 8.542 | 3.844 | 3.577 | 3.960 |
| Governance and Services | (12.904) | (6.804) | (5.864) | 2.243 | 5.106 | 2.352 | 137.736 | 18.481 |
(1) Net value adjustments on NPL Area receivables were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
The following table shows the main indicators and performances recorded by the Group during the last 5 years.
| HISTORICAL DATA (in thousands of Euro) |
31.12.2016 | 31.12.2015 | 31.12.2014 | 31.12.2013 | 31.12.2012 |
|---|---|---|---|---|---|
| Available for sale financial assets | 374.229 | 3.221.533 | 243.325 | 2.529.179 | 1.974.591 |
| Held to maturity financial assets | - | - | 4.827.363 | 5.818.019 | 3.120.428 |
| Loans to customers | 5.928.212 | 3.437.136 | 2.814.330 | 2.296.933 | 2.292.314 |
| Due to banks | 503.964 | 662.985 | 2.258.967 | 6.665.847 | 557.323 |
| Due to customers | 5.045.136 | 5.487.476 | 5.483.474 | 4.178.276 | 7.119.008 |
| Equity | 1.218.783 | 573.467 | 437.850 | 380.323 | 309.017 |
| Net banking income | 325.971 | 407.958 | 284.141 | 264.196 | 244.917 |
| Net profit from financial activities | 299.366 | 373.708 | 249.631 | 219.609 | 191.166 |
| Group net profit | 687.945 | 161.966 | 95.876 | 84.841 | 78.076 |
| KPI : | |||||
| ROE | 98,5% | 30,4% | 23,5% | 24,8% | 29,9% |
| ROA | 8,3% | 3,5% | 1,7% | 1,3% | 1,5% |
| ROCA | 8,5% | 1,5% | 1,3% | 0,6% | 1,0% |
| Total own funds Capital Ratio (2) | 98,5% | 15,4% | 14,2% | 13,5% | 12,7% |
| Common Equity Tier 1 Ratio (2) | 8,3% | 14,7% | 13,9% | 13,7% | 12,9% |
| Number of shares outstanding at period end(3) (in thousands) |
53.811 | 53.072 | 52.924 | 52.728 | 53.551 |
| Book per share | 22,81 | 10,81 | 8,27 | 7,21 | 5,77 |
| EPS | 12,94 | 3,05 | 1,81 | 1,61 | 1,46 |
| Dividend per share | 0,82 | 0,76 | 0,66 | 0,57 | 0,37 |
| Payout ratio | 6,4% | 24,9% | 36,4% | 35,4% | 25,4% |
(1) Net value adjustments on receivables of the NPL Area, totalling 32,6 million Euro at 31 December 2016 compared to 3,6 million Euro at 31 December 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
(2) The new set of harmonised regulations for banks and investment firms included in EU Regulation no. 575/2013 (CRR) and in Directive 2013/36/EU (CRD IV) is applicable as from 1 January 2014. Data for periods up until 30 September 2013 were recognised according to previous regulations (Basel 2). The Solvency ratio and the Core Tier 1 have been presented under Total Own Funds Ratio and Common Equity Tier 1 Ratio, respectively.
(3) Outstanding shares are net of treasury shares held in the portfolio.
Consolidated Highlights (2016 VS 2015)
Here below are the regulatory changes introduced in 2016 the impacting Banca IFIS Group:
The model for segment reporting is in line with the new organisational structure used by the Head Office to analyse Group results, which, following the acquisition of the former GE Capital Interbanca Group, now includes two new sectors: Corporate Banking and Leasing. In addition, since the acquisition date, the Trade Receivables sector has been benefiting from the contribution of IFIS Factoring.
Therefore, the organisational structure consists of the following segments: Trade receivables, Corporate banking, Leasing, NPL Area, Tax receivables, Governance and Services.
The Governance and Services segment manages the Group's financial resources and allocates funding costs to operating segments through the Group's internal transfer rate system.
Here below are the results achieved in 2016 by the various business segments, which will be analysed in the sections dedicated to the individual sectors.
| INCOME STATEMENT DATA (in thousands of Euro) |
TRADE RECEIVA BLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TOTAL |
|---|---|---|---|---|---|---|---|
| Net banking income | |||||||
| Amounts at 31.12.2016 | 174.433 | 2.952 | (1.172) | 187.368 | 13.990 | (18.972) | 358.599 |
| Amounts at 31.12.2015 | 158.671 | n.a. | n.a. | 56.300 | 20.335 | 172.652 | 407.958 |
| % Change | 9,9% | n.a. | n.a. | 232,8% | (31,2)% | (111,0)% | (12,1)% |
| Net profit (loss) from financial activi ties |
|||||||
| Amounts at 31.12.2016 | 154.128 | 2.889 | (2.682) | 154.740 | 13.620 | (23.329) | 299.366 |
| Amounts at 31.12.2015 | 137.423 | n.a. | n.a. | 52.687 | 19.923 | 163.675 | 373.708 |
| % Change | 12,2% | n.a. | n.a. | 193,7% | (31,6)% | (114,3)% | (19,9)% |
| QUARTERLY INCOME STATEMENT DATA (in thousands of Euro) |
TRADE RECEIVA BLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TOTAL |
|---|---|---|---|---|---|---|---|
| Net banking income | |||||||
| Fourth quarter 2016 | 53.142 | 2.952 | (1.172) | 51.825 | 3.126 | (12.546) | 97.327 |
| Fourth quarter 2015 | 39.728 | n.a. | n.a. | 22.402 | 8.828 | 5.834 | 76.792 |
| % Change | 33,8% | - n.a. |
- n.a. |
131,3% | (64,6)% | (315,0)% | 26,7% |
| Net profit (loss) from financial activi ties |
|||||||
| Fourth quarter 2016 | 48.061 | 2.889 | (2.682) | 42.780 | 3.025 | (12.904) | 81.169 |
| Fourth quarter 2015 | 33.237 | n.a. | n.a. | 21.818 | 8.542 | 5.106 | 68.703 |
| % Change | 44,6% | - n.a. |
n.a. | 96,1% | (64,6)% | (352,7)% | 18,1% |
| STATEMENT OF FINANCIAL POSITION (in thousands of Euro) |
TRADE RECEIVA BLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TOTAL |
|---|---|---|---|---|---|---|---|
| Available for sale financial assets | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 374.229 | 374.229 |
| Amounts at 31.12.2015 | - | - | - | - | - | 3.221.533 | 3.221.533 |
| % Change | - | - | - | - | - | (88,4)% | (88,4)% |
| Due from banks | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 1.393.358 | 1.393.358 |
| Amounts at 31.12.2015 | - | - | - | - | - | 95.352 | 95.352 |
| % Change | - | - | - | - | - | 1361,3% | 1361,3% |
| Loans to customers | |||||||
| Amounts at 31.12.2016 | 3.092.488 | 905.682 | 1.235.638 | 562.146 | 124.697 | 7.561 | 5.928.212 |
| Amounts at 31.12.2015 | 2.848.124 | n.a. | n.a. | 354.352 | 130.663 | 103.997 | 3.437.136 |
| % Change | 8,6% | n.a. | n.a. | 58,6% | (4,6)% | (92,7)% | 72,5% |
| Due to banks | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 503.964 | 503.964 |
| Amounts at 31.12.2015 | - | - | - | - | - | 662.985 | 662.985 |
| % Change | - | - | - | - | - | (24,0)% | (24,0)% |
| Due to customers | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 5.045.136 | 5.045.136 |
| Amounts at 31.12.2015 | - | - | - | - | - | 5.487.476 | 5.487.476 |
| % Change | - | - | - | - | - | (8,1)% | (8,1)% |
| SEGMENT KPIs (in thousands of Euro) |
TRADE RE CEIVABLES |
CORPORATE BANKING |
LEASING | NPL AREA | TAX RECEIV ABLES |
GOVERN ANCE AND SERVICES |
|---|---|---|---|---|---|---|
| Turnover | ||||||
| Amounts at 31.12.2016 | 10.549.881 | n.a. | n.a. | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 10.126.397 | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 4,2% | - | - | - | - | - |
| Nominal amount of receivables man aged |
||||||
| Amounts at 31.12.2016 | 3.880.835 | 1.739.175 | 1.273.933 | 9.660.196 | 172.145 | n.a. |
| Amounts at 31.12.2015 | 3.576.982 | n.a. | n.a. | 8.161.005 | 190.553 | n.a. |
| % Change | 8,5% | - | - | 18,4% | (9,7)% | - |
| Cost of credit quality | ||||||
| Amounts at 31.12.2016 | 0,8% | 0,1% | 1,5% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 0,9% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (0,1)% | n.a. | n.a. | - | - | - |
| Net bad loans/Loans to customers | ||||||
| Amounts at 31.12.2016 | 1,0% | 3,0% | 0,5% | 57,0% | 0,0% | n.a. |
| Amounts at 31.12.2015 | 1,1% | n.a. | n.a. | 45,0% | 0,0% | n.a. |
| % Change | (0,1)% | n.a. | n.a. | 12,1% | 0,0% | - |
| Net bad loans/Equity | ||||||
| Amounts at 31.12.2016 | 2,6% | 2,2% | 0,5% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 5,4% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (2,8)% | n.a. | n.a. | - | - | - |
| Coverage ratio on gross bad loans | ||||||
| Amounts at 31.12.2016 | 88,5% | 94,0% | 92,2% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 87,9% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 0,7% | n.a. | n.a. | - | - | - |
| Non-performing exposures/Loans to customers |
||||||
| Amounts at 31.12.2016 | 6,5% | 19,0% | 3,0% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 4,5% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 2,0% | n.a. | n.a. | - | - | - |
| Net non-performing loans/Equity | ||||||
| Amounts at 31.12.2016 | 16,5% | 14,1% | 3,0% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 22,4% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (6,0)% | n.a. | n.a. | - | - | - |
| RWA | ||||||
| Amounts at 31.12.2016 | 2.348.131 | 929.337 | 875.153 | 562.146 | 50.004 | 263.512(4) |
| Amounts at 31.12.2015 | 1.970.886 | n.a. | n.a. | 354.352 | 41.614 | 25.256 |
| % Change | 19,1% | n.a. | n.a. | 58,6% | 20,2% | 943,4% |
(1) Gross flow of the receivables sold by the customers in a specific period of time.
(2) Risk Weighted Assets; the amount refers exclusively to the financial items reported in the segments.
(3) Data restated after initial publication.
(4) The Governance and Services sector's RWAs include in 2016 the investment in IFIS Rental Services, a non-financial company consolidated using the equity method and that is not part of the Banking Group for supervisory purposes.
This segment includes the following business areas:
• Crediti Commerciali Italia and Crediti Commerciali International, dedicated to supporting the trade receivables of SMEs operating in the domestic market as well as companies growing abroad or based abroad and working with Italian customers; this area includes the operations carried out in Poland by the investee IFIS Finance's S.p. Zo.o.; these business areas operate under the Banca IFIS Impresa brand; Banca IFIS Pharma and Pharmacies, operating under the brand of the same name, supporting the trade receivables of local health services' suppliers and pharmacists.
| ABSOLUTE | % | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 118.693 | 98.175 | 20.518 | 20,9% | |||||||||||||
| 55.740 | 60.496 | (4.756) | (7,9)% | |||||||||||||
| 174.433 | 158.671 | 15.762 | 9,9% | |||||||||||||
| (20.305) | (21.248) | 943 | (4,4)% | |||||||||||||
| 154.128 | 137.423 | 16.705 | 12,2% | |||||||||||||
| 4th Q. 2016 | ||||||||||||||||
| ABSOLUTE | ||||||||||||||||
| 39.449 | 24.114 | 15.335 | 63,6% | |||||||||||||
| 13.693 | 15.614 | (1.921) | (12,3)% | |||||||||||||
| 53.142 | 39.728 | 13.414 | 33,8% | |||||||||||||
| (5.081) | (6.491) | 1.410 | (21,7)% | |||||||||||||
| 31.12.2016 | 31.12.2015 4th Q. 2015 |
CHANGE CHANGE |
Net profit (loss) from financial activities 48.061 33.237 14.824 44,6%
The net banking income of the Trade Receivables segment amounted to 174,4 million Euro, up 9,9% compared to 158,7 million Euro in 2015. The segment had very positive results in terms of volumes: it generated 10,5 billion Euro in turnover (+4,2% from December 2015), with 5.360 corporate customers (up 19% compared to the prior-year period) and 3,1 billion Euro in outstanding loans (+8,6% from December 2015). These results confirm that the Bank's business model, which focuses on supporting SMEs, is effective in a scenario with interest rates at record lows.
Volumes benefited also from the inclusion of the new subsidiary IFIS Factoring (contributing 192 million Euro in loans, of which 15,9 non-performing) in this segment, while the contribution to —referring only to December—was limited (207 thousand Euro).
In particular, net banking income increased thanks to, among other things, the results of the IFIS Pharma business area (+59,0%, from 29,4 million Euro in the prior year to 46,8 million Euro), which benefited from the adoption of the new model to estimate the cash flows of health service receivables purchased outright (contributing 15,8 million Euro). Specifically, the new method includes interest on arrears considered recoverable in the estimated cash flows, as it is a structural element of the day-today management of health service receivables.
Net value adjustments on receivables amounted to 20,3 million Euro (21,2 million Euro in the prior-year period, -4,4%), and referred almost entirely to adjustments made by Banca IFIS. Their ratio relative to the increased average loans resulted in an improved credit risk cost, which fell from 90 bps at 31 December 2015 to 79 bps.
| STATEMENT OF FINANCIAL POSITION | CHANGE | ||||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2015 | ABSOLUTE | % | |
| Bad loans | 31.692 | 30.950 | 742 | 2,4% | |
| Unlikely to pay | 50.900 | 39.551 | 11.349 | 28,7% | |
| Past due loans | 118.420 | 58.214 | 60.206 | 103,4% | |
| Total net non-performing exposures to customers | 201.012 | 128.715 | 72.297 | 56,2% | |
| Net performing loans | 2.891.476 | 2.719.409 | 172.067 | 6,3% | |
| Total on-balance-sheet loans to customers | 3.092.488 | 2.848.124 | 244.364 | 8,6% |
Loans to customers included in this segment are composed as follows: 28,3% are receivables due from the Public Administration (compared to 32,1% at 31 December 2015) and 71,7% due from the private sector (compared to 67,9% at 31 December 2015).
Net non-performing exposures in the Trade Receivables segment rose 56,2% from 128,7 million Euro at the end of 2015 to 201,0 million Euro, largely because of rising past due exposures to the Public Administration. IFIS Factoring made a marginal contribution (15,9 million Euro). This was the result of the acquisitions of portfolios of past due loans carried out starting from late December 2015 under an agreement with a leading market player, which allowed the Bank to enter the multi-utilities business. These portfolios consist of receivables due from local administrations for which the Bank has commenced collection actions by entering into settlement plans.
As for unlikely to pay, the increase was largely attributable to three significant positions, totalling 16,5 million Euro, previously classified under non-performing and performing past due exposures.
The segment's net bad-loan ratio was 1,0%, down slightly from the end of 2015 (1,1% at 31 December 2015), while the ratio of net unlikely to pay to loans rose to 1,6% from 1,4% at 31 December 2015. The segment's ratio of total net non-performing exposures to loans rose from 4,5% at the end of 2015 to 6,5% at 31 December 2016. Net non-performing loans amounted to 16,5% as a percentage of Group equity, compared to 22,4% in the prior year.
| NON-PERFORMING TRADE RECEIVABLES (in thousands of Euro) |
BAD LOANS(1) | UNLIKELY TO PAY |
PAST DUE LOANS |
TOTAL |
|---|---|---|---|---|
| BALANCE AT 31.12.2016 | ||||
| Nominal amount of non-performing exposures | 276.741 | 76.551 | 122.451 | 475.743 |
| As a proportion of total gross receivables | 8,2% | 2,3% | 3,6% | 14,1% |
| Impairment losses | 245.049 | 25.651 | 4.031 | 274.731 |
| As a proportion of gross value | 88,5% | 33,5% | 3,3% | 57,7% |
| Net amount | 31.692 | 50.900 | 118.420 | 201.012 |
| As a proportion of net total receivables | 1,0% | 1,6% | 3,8% | 6,5% |
| BALANCE AT 31.12.2015 | ||||
| Nominal amount of non-performing exposures | 255.404 | 58.257 | 59.788 | 373.449 |
| As a proportion of total gross receivables | 8,2% | 1,9% | 1,9% | 12,0% |
| Impairment losses | 224.454 | 18.706 | 1.574 | 244.734 |
| As a proportion of the nominal amount | 87,9% | 32,1% | 2,6% | 65,5% |
| Net amount | 30.950 | 39.551 | 58.214 | 128.715 |
| As a proportion of net total receivables | 1,1% | 1,4% | 2,0% | 4,5% |
(1) Bad loans are recognised in the financial statements up to the point in which all credit collection procedures have been exhausted.
Net bad loans amounted to 31,7 million Euro, +2,4% from the end of 2015; the segment's net bad-loan ratio was 1,0%, compared to 1,1% at 31 December 2015. As a proportion of equity, net bad loans were unchanged from 31 December 2015 at 5,4%. The coverage ratio stood at 88,5% (87,9% at 31 December 2015)
The balance of net unlikely to pay was 50,9 million Euro, +28,7% from 39,6 at the end of 2015. The increase was largely attributable to three positions that fall into this risk category. The coverage ratio stood at 33,5% (32,1% at 31 December 2015)
Net non-performing past due exposures totalled 118,4 million Euro, compared with 58,2 million Euro in December 2015 (+103,4%). Past due exposures to the private sector rose from 57,0 million Euro in December 2015 to 71,6 million Euro at 31 December 2016, and the exposures to the public sector from 1,2 million Euro to 46,8 million Euro. The increase was due to the contribution from IFIS Factoring following the acquisition of the former GE Capital Interbanca Group as well as the purchases of past due loans finalised in late December 2015 under an agreement with a leading market player, which allowed the Bank to enter the multi-utilities business. These portfolios consist of receivables due from local administrations for which the Bank has commenced collection actions by entering into settlement plans.
The coverage ratio stood at 3,3% (2,6% at 31 December 2015)
| CHANGE | ||||
|---|---|---|---|---|
| KPI | 31.12.2016 | 31.12.2015 | ABSOLUTE | % |
| Turnover | 10.549.881 | 10.126.397 | 423.484 | 4,2% |
| Net banking income/ Turnover | 1,7% | 1,6% | 0 | 0,1% |
| CHANGE | ||||
|---|---|---|---|---|
| KPI y/y | 31.12.2016 | 31.12.2015 | ABSOLUTE | % |
| Cost of credit quality | 0,8% | 0,9% | - | (0,1)% |
| Net bad loans/Loans to customers | 1,0% | 1,1% | - | (0,1)% |
| Net bad loans/Equity | 2,6% | 5,4% | - | (2,8)% |
| Coverage ratio on gross bad loans | 88,5% | 87,9% | - | 0,7% |
| Non-performing exposures/Loans to customers | 6,5% | 4,5% | - | 2,0% |
| Net non-performing loans/Equity | 16,5% | 22,4% | - | (6,0)% |
| Total RWA per segment | 2.348.131 | 1.970.886 | 377.245 | 19,1% |
The following table shows the nominal amount of receivables purchased (operating data not recognised in the statements) for factoring transactions outstanding at the end of the period (Total Receivables), broken down into receivables with or without recourse and receivables purchased outright. Please note that the breakdown of purchased receivables in the following table is based on the contract form used by the Bank.
| TOTAL RECEIVABLES | CHANGE | |||||
|---|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2015 | ABSOLUTE | % | ||
| With recourse | 2.150.930 | 2.128.825 | 22.105 | 1,0% | ||
| of which due from the Public Administration | 332.735 | 361.000 | (28.265) | (7,8)% | ||
| Without recourse | 464.956 | 277.159 | 187.797 | 67,8% | ||
| of which due from the Public Administration | 8.949 | 4.468 | 4.481 | 100,3% | ||
| Outright purchases | 1.264.950 | 1.170.998 | 93.952 | 8,0% | ||
| of which due from the Public Administration | 812.384 | 888.844 | (76.460) | (8,6)% | ||
| Total receivables | 3.880.836 | 3.576.982 | 303.854 | 8,5% | ||
| of which due from the Public Administration | 1.154.068 | 1.254.312 | (100.244) | (8,0)% |
The breakdown of customers by geographic area in Italy, with a separate indication for those abroad, is as follows:
| BREAKDOWN OF CUSTOMERS BY GEO GRAPHIC AREA |
LOANS | TURNOVER |
|---|---|---|
| Northern Italy | 43,7% | 52,4% |
| Central Italy | 24,2% | 30,9% |
| Southern Italy | 25,4% | 10,5% |
| Abroad | 6,7% | 6,2% |
| Total | 100,0% | 100,0% |
This segment includes the following business areas:
• Medium/long/term financing, supporting the company's operating cycle through services ranging from working capital financing to the support for productive investments;
• Structured Finance, supporting companies in the legal, organisational and financial arrangement of bilateral or syndicated loans;
• Workout & Recovery, which manages the UTPs and Bad Loans of all the portfolios of the sector's other two business areas, as well as the runoff of project finance, shipping and real estate portfolios.
| INCOME STATEMENT DATA | CHANGE | |||
|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2015 | ABSOLUTE | % |
| Net interest income | 8.385 | n.a. | n.a. | n.a. |
| Net commission income | (5.260) | n.a. | n.a. | n.a. |
| Dividends and trading | (173) | n.a. | n.a. | n.a. |
| Net banking income | 2.952 | n.a. | n.a. | n.a. |
| Net impairment losses on receivables and other financial as sets |
(63) | n.a. | n.a. | n.a. |
| Net profit (loss) from financial activities | 2.889 | n.a. | n.a. | n.a. |
| QUARTERLY INCOME STATEMENT DATA | CHANGE | |||
|---|---|---|---|---|
| (in thousands of Euro) | 4th Q. 2016 | 4th Q. 2015 | % | |
| Net interest income | 8.385 | n.a. | n.a. | n.a. |
| Net commission income | (5.260) | n.a. | n.a. | n.a. |
| Dividends and trading | (173) | n.a. | n.a. | n.a. |
| Net banking income | 2.952 | n.a. | n.a. | n.a. |
| Net impairment losses on receivables and other financial as sets |
(63) | n.a. | n.a. | n.a. |
| Net profit (loss) from financial activities | 2.889 | n.a. | n.a. | n.a. |
The net banking income of the Corporate Banking sector, which contributed to the 2016 results only for the month of December, totalled 3,0 million Euro. This amount included the 8,5 million Euro positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiaries over time. Net banking income also included 5,8 million Euro in commission expense for the arrangement of the Indigo Loan securitisation, as detailed in Part E of the Notes to the Consolidated Financial Statements.
| STATEMENT OF FINANCIAL POSITION | 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | ||
| Bad loans | 27.260 | n.a. | n.a. | n.a. |
| Unlikely to pay | 142.741 | n.a. | n.a. | n.a. |
| Past due loans | 1.669 | n.a. | n.a. | n.a. |
| Total net non-performing exposures to customers | 171.670 | n.a. | n.a. | n.a. |
| Net performing loans | 734.012 | n.a. | n.a. | n.a. |
| Total on-balance-sheet loans to customers | 905.682 | n.a. | n.a. | n.a. |
| NON-PERFORMING CORPORATE BANKING LOANS (in thousands of Euro) |
BAD LOANS(1) | UNLIKELY TO PAY |
PAST DUE LOANS |
TOTAL |
|---|---|---|---|---|
| BALANCE AT 31.12.2016 | ||||
| Nominal amount of non-performing exposures | 456.184 | 265.412 | 1.685 | 723.281 |
| As a proportion of total gross receivables | 30,9% | 18,0% | 0,1% | 49,0% |
| Impairment losses | 428.924 | 122.671 | 16 | 551.611 |
| As a proportion of gross value | 94,0% | 46,2% | 0,9% | 76,3% |
| Net amount | 27.260 | 142.741 | 1.669 | 171.670 |
| As a proportion of net total receivables | 3,0% | 15,8% | 0,2% | 19,0% |
| CHANGE | ||||
|---|---|---|---|---|
| KPI | 31.12.2016 | 31.12.2015 | ABSOLUTE | % |
| Nominal amount of receivables managed | 1.739.175 | n.a. | n.a. | n.a. |
| Cost of credit quality | 0,1% | n.a. | n.a. | n.a. |
| Net bad loans/Loans to customers | 3,0% | n.a. | n.a. | n.a. |
| Net bad loans/Equity | 2,2% | n.a. | n.a. | n.a. |
| Coverage ratio on gross bad loans | 94,0% | n.a. | n.a. | n.a. |
| Non-performing exposures/Loans to customers | 19,0% | n.a. | n.a. | n.a. |
| Net non-performing loans/Equity | 14,1% | n.a. | n.a. | n.a. |
| Total RWA per segment | 929.337 | n.a. | n.a. | n.a. |
This sector provides finance and operating leases to small businesses and SMEs.
| INCOME STATEMENT DATA | 31.12.2016 31.12.2015 |
CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | |||
| Net interest income | 4.916 | n.a. | n.a. | n.a. | |
| Net commission income | (6.095) | n.a. | n.a. | n.a. | |
| Dividends and trading | 7 | n.a. | n.a. | n.a. | |
| Net banking income | (1.172) | n.a. | n.a. | n.a. | |
| Net impairment losses on loans and receivables | (1.510) | n.a. | n.a. | n.a. | |
| Net profit (loss) from financial activities | (2.682) | n.a. | n.a. | n.a. |
| QUARTERLY INCOME STATEMENT DATA | 4th Q. 2016 | 4th Q. 2015 | CHANGE | |
|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | ||
| Net interest income | 4.916 | n.a. | n.a. | n.a. |
| Net commission income | (6.095) | n.a. | n.a. | n.a. |
| Dividends and trading | 7 | n.a. | n.a. | n.a. |
| Net banking income | (1.172) | n.a. | n.a. | n.a. |
| Net impairment losses on loans and receivables | (1.510) | n.a. | n.a. | n.a. |
| Net profit (loss) from financial activities | (2.682) | n.a. | n.a. | n.a. |
The net banking income of the Leasing sector, which contributed to the 2016 results only for the month of December, was a negative 1,2 million Euro. Net banking income included also the 1,3 million Euro positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiaries over time.
The amount included also 6,4 million Euro in commission expense for the arrangement of the Indigo Lease securitisation, as detailed in Part E of the Notes to the Consolidated Financial Statements.
| STATEMENT OF FINANCIAL POSITION | 31.12.2016 | 31.12.2015 | CHANGE | ||
|---|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | |||
| Bad loans | 6.177 | n.a. | n.a. | n.a. | |
| Unlikely to pay | 13.622 | n.a. | n.a. | n.a. | |
| Past due loans | 17.352 | n.a. | n.a. | n.a. | |
| Total net non-performing exposures to customers | 37.151 | n.a. | n.a. | n.a. | |
| Net performing loans | 1.198.487 | n.a. | n.a. | n.a. | |
| Total on-balance-sheet loans to customers | 1.235.638 | n.a. | n.a. | n.a. |
| NON-PERFORMING LEASING LOANS (in thousands of Euro) |
BAD LOANS(1) | UNLIKELY TO PAY |
PAST DUE LOANS |
TOTAL |
|---|---|---|---|---|
| BALANCE AT 31.12.2016 | ||||
| Nominal amount of non-performing exposures | 78.997 | 41.440 | 46.450 | 166.887 |
| As a proportion of total gross receivables | 5,7% | 3,0% | 3,4% | 12,1% |
| Impairment losses | 72.820 | 27.818 | 29.099 | 129.737 |
| As a proportion of gross value | 92,2% | 67,1% | 62,6% | 77,7% |
| Net amount | 6.177 | 13.622 | 17.351 | 37.150 |
| As a proportion of net total receivables | 0,5% | 1,1% | 1,4% | 3,0% |
| CHANGE | ||||
|---|---|---|---|---|
| KPI | 31.12.2016 | 31.12.2015 | ABSOLUTE | % |
| Nominal amount of receivables managed | 1.273.933 | n.a. | n.a. | n.a. |
| Cost of credit quality | 1,5% | n.a. | n.a. | n.a. |
| Net bad loans/Loans to customers | 0,5% | n.a. | n.a. | n.a. |
| Net bad loans/Equity | 0,5% | n.a. | n.a. | n.a. |
| Coverage ratio on gross bad loans | 92,2% | n.a. | n.a. | n.a. |
| Non-performing exposures/Loans to customers | 3,0% | n.a. | n.a. | n.a. |
| Net non-performing loans/Equity | 3,0% | n.a. | n.a. | n.a. |
| Total RWA per segment | 875.153 | n.a. | n.a. | n.a. |
This is the Banca IFIS Group's segment dedicated to non-recourse factoring and managing mostly unsecured distressed retail loans. It serves households under the CrediFamiglia brand.
The business is closely associated with recovering and collecting non-performing exposures.
The Bank manages the portfolio of acquired receivables using two different methods: non-judicial and judicial operations.
As for the portfolio managed through non-judicial operations, to measure them the Bank uses a model based on a simulation of cash flows that projects the "breakdown" of the nominal amount of the receivable "over time" based on the historical recovery profile for similar clusters. As for the positions with funding characteristics (bills of exchange or settlement plans agreed with the debtor), the Bank uses a "deterministic" model based on the measurement of the future instalments of the settlement plan, net of the historical default rate.
Judicial operations consist in collecting debts through legal actions to secure a court order for the garnishment of one fifth of pension benefits or wages. The cash flows from judicial operations are not simulated using the model: the manager individually measures them for each individual position and enters them in the system.
| INCOME STATEMENT DATA | 31.12.2016 | CHANGE | ||||
|---|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2015 | ABSOLUTE | % | |||
| Interest income from amortised cost | 35.959 | 25.061 | 10.898 | 43,5% | ||
| Other interest income | 115.542 | 21.056 | 94.486 | 448,7% | ||
| Funding costs | (6.442) | (3.612) | (2.830) | 78,3% | ||
| Net interest income | 145.059 | 42.505 | 102.554 | 241,3% | ||
| Net commission income | (2.220) | (1.153) | (1.067) | 92,5% | ||
| Gain on sale of receivables | 44.529 | 14.948 | 29.581 | 197,9% | ||
| Net banking income | 187.368 | 56.300 | 131.068 | 232,8% | ||
| Net impairment losses/reversals on receivables | (32.628) | (3.613) | (29.015) | 803,1% | ||
| Net profit (loss) from financial activities | 154.740 | 52.687 | 102.053 | 193,7% |
| QUARTERLY INCOME STATEMENT DATA | 4th Q. 2016 | CHANGE | |||||
|---|---|---|---|---|---|---|---|
| (in thousands of Euro) | 4th Q. 2015 | ABSOLUTE | % | ||||
| Interest income from amortised cost | 11.555 | 6.360 | 5.195 | 81,7% | |||
| Other interest income | 25.295 | 3.069 | 22.226 | 724,2% | |||
| Funding costs | (2.026) | (1.214) | (812) | 66,9% | |||
| Net interest income | 34.824 | 8.215 | 26.609 | 323,9% | |||
| Net commission income | (769) | (761) | (8) | 1,1% | |||
| Gain on sale of receivables | 17.770 | 14.948 | 2.822 | 18,9% | |||
| Net banking income | 51.825 | 22.402 | 29.423 | 131,3% | |||
| Net impairment losses/reversals on receivables | (9.045) | (584) | (8.461) | 1.448,8% | |||
| Net profit (loss) from financial activities | 42.780 | 21.818 | 20.962 | 96,1% |
The results for the year were positively influenced by the continuing debt collection operations, consisting in bills of exchange and expressions willingness, as well as the reclassification to amortised cost of a sizeable share of the portfolio following the end of the documentary verification process and the ensuing bills of exchange and settlement plans entered into for these positions, contributing nearly 9,0 million Euro to net profit from financial activities.
Concerning net value adjustments, totalling 32,6 million Euro, 3,7 million Euro referred to the write-off of a number of positions for which the debtor was deceased and no heirs were found, and 1,2 million Euro to some positions for which the statute of limitations had expired. The item also included 29,3 million Euro in impairment losses referring to positions for which the net present value of expected cash flows had fallen below the purchase price, partly offset by 6,5 million Euro in interest accrued. This impact (NPV lower than the purchase price) included 4,8 million Euro in impairment losses recognised once the Bank reclassified a number of NPL positions acquired in recent years to amortised cost after completing the verification process to determine whether the new estimating model created at the end of 2015 could apply to positions with an "acceleration clause date" that is recent compared to the acquisition date. As a result of the reclassification to amortised cost, the Group recognised the impairment losses as well as 2,2 million Euro in additional interest income recognised under Interest receivable and similar income.
In addition, there were 1,6 million Euro in reversals of impairment losses consisting in additional interest income recognised under line item 130 up to the amount of the previously recognised impairment loss.
These events (NPV of cash flows lower than the purchase price, deceased debtor, and expired statute of limitations), in accordance with the Bank's accounting policy, represented trigger events causing the changes in amortised cost to qualify as impairment losses to be recognised under item 130 - Net value adjustments on receivables. However, the overall net profit from financial activities is more relevant to understanding the segment's performance.
| STATEMENT OF FINANCIAL POSITION | 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | ||
| Bad loans | 320.612 | 159.336 | 161.276 | 101,2% |
| Unlikely to pay | 241.518 | 194.995 | 46.523 | 23,9% |
| Past due loans | - | - | - | - |
| Total net non-performing exposures to customers | 562.130 | 354.331 | 207.799 | 58,6% |
| Net performing loans | 16 | 21 | (5) | (23,8)% |
| Total on-balance-sheet loans to customers | 562.146 | 354.352 | 207.794 | 58,6% |
| KPI | 30.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|---|
| ABSOLUTE | % | |||
| Nominal amount of receivables managed | 9.660.196 | 8.161.005 | 1.499.191 | 18,4% |
| Total RWA per segment | 562.146 | 354.352 | 207.794 | 58,6% |
| NPL PERFORMANCE | (in thousands of Euro) |
|---|---|
| Receivables portfolio at 31.12.2015 | 354.352 |
| Purchases | 195.606 |
| Sales | (73.028) |
| Gain on sales | 44.529 |
| Interest income from amortised cost | 35.959 |
| Other components of net interest income from change in cash flow | 115.542 |
| Impairment losses/reversals from change in cash flow | (32.628) |
| Collections | (78.186) |
| Receivables portfolio at 31.12.2016 | 562.146 |
The purchases made in the period led to the acquisition of portfolios of financial receivables with a par value of approximately 3,1 billion Euro at a price of 195,6 million Euro, consisting of 463.566 positions. At 31 December 2016, the segment's receivables included 9,0 million Euro (par value of 744,6 million Euro, approximately 73 thousand positions) in loans sold at the end of the year after the Bank accepted the buyer's binding offer.
The mentioned binding offer contained all the elements required to determine whether all risks and rewards relating to the receivables sold were substantially transferred (derecognition). However, since the transfer had not been formally completed at the reporting date, the Bank presented the relevant impact without derecognising the assets: instead, it recognised a receivable due from the buyer equal to the consideration, and a payable due to the buyer equal to the amount of the receivables sold. The positive difference, amounting to 17,8 million Euro, was recognised in profit or loss under gains on the sale of receivables.
During 2016, the Bank finalised two other sales, raising 27,0 million Euro. Gains on sales included a 279 thousand Euro loss on the repurchase of some portfolios sold in late 2015 in accordance with contractual provisions.
During the year, the borrowers settled their debt mainly according to the following methods:
In 2016, funding was up steadily from 2015, reaching 312,2 million Euro compared to 244,5 million Euro, +27,7%: this was entirely attributable to settlement plans (expressions of willingness). Collections made during the year amounted to 78,2 million, compared to 55,6 million in the prior-year period.
At the end of the year, the portfolio managed by the NPL Area included 1.397.957 positions, for a par value of 9,7 billion Euro and nearly 967 thousand debtors.
It is the segment specialised in purchasing tax receivables arising from insolvency proceedings; it operates under the Fast Finance brand and offers to buy both accrued and accruing tax receivables on which repayment has already been requested or which shall be requested in the future, and that arose during insolvency proceedings or in prior years. As a complement to its core business, this segment seldom acquires also trade receivables from insolvency proceedings.
| INCOME STATEMENT DATA | 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | ||
| Net interest income | 13.998 | 20.307 | (6.309) | (31,1)% |
| Net commission income | (8) | 28 | (36) | (128,6)% |
| Net banking income | 13.990 | 20.335 | (6.345) | (31,2)% |
| Net impairment losses/reversals on receivables | (371) | (412) | 41 | (10,0)% |
| Net profit (loss) from financial activities | 13.619 | 19.923 | (6.304) | (31,6)% |
| QUARTERLY INCOME STATEMENT DATA | 4th Q. 2016 | 4th Q. 2015 | CHANGE | |
|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | ||
| Net interest income | 3.129 | 8.827 | (5.698) | (64,6)% |
| Net commission income | (3) | 1 | (4) | (400,0)% |
| Net banking income | 3.126 | 8.828 | (5.702) | (64,6)% |
| Net impairment losses/reversals on receivables | (102) | (286) | 184 | (64,3)% |
| Net profit (loss) from financial activities | 3.024 | 8.542 | (5.518) | (64,6)% |
Net banking income is generated by the interest accrued according to the amortised cost method and funding costs allocated to the segment.
The net banking income of the Tax Receivables segment amounted to 14,0 million Euro, down 31,2% from 20,3 million Euro at 31 December 2015. However, the prior-year figure included the impact of a single transaction that resulted in a 5,2 million Euro gain in the fourth quarter of 2015.
| STATEMENT OF FINANCIAL POSITION | 31.12.2016 | 31.12.2015 | CHANGE | ||
|---|---|---|---|---|---|
| (in thousands of Euro) | ABSOLUTE | % | |||
| Bad loans | 5 | - | 5 | n.a. | |
| Unlikely to pay | 194 | - | 194 | n.a. | |
| Past due loans | - | - | - | - | |
| Total net non-performing exposures to customers | 199 | - | 199 | n.a. | |
| Net performing loans | 124.498 | 130.663 | (6.165) | (4,7)% | |
| Total on-balance-sheet loans to customers | 124.697 | 130.663 | (5.966) | (4,6)% |
Since the Public Administration is the counterparty, tax receivables are classified as performing; trade receivables, on the other hand, are classified as non-performing exposures, if required.
| KPI | 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|---|
| ABSOLUTE | % | |||
| Nominal amount of receivables managed | 172.145 | 190.553 | (18.408) | (9,7)% |
| Total RWA per segment | 50.004 | 41.614 | 8.390 | 20,2% |
| TAX RECEIVABLES PERFORMANCE | (in thousands of Euro) |
|---|---|
| Receivables portfolio at 31.12.2015 | 130.690 |
| Purchases | 63.599 |
| Interest income from amortised cost | 8.951 |
| Other components of net interest income from change in cash flow | 6.352 |
| Impairment losses/reversals from change in cash flow | (371) |
| Collections | (84.524) |
| Receivables portfolio at 31.12.2016 | 124.697 |
During the period, the sector collected 84,5 million Euro and purchased 63,6 million Euro worth of receivables.
With these purchases, the segment's portfolio comprises 1.369 positions, for a par value of 172,1 million Euro and a value at amortised cost of 124,7 million Euro at 31 December 2016.
Governance and Services provides the operating segments with the financial resources and services necessary to perform their respective business activities. The segment comprises, among other things, the resources required for the performance of the services of the Audit, Administration-Accounting, Planning, Organisation and ICT functions, as well as the structures responsible for raising, managing and allocating financial resources to the operating segments. The data includes the contribution of the former GE Capital Interbanca Group not allocated to individual segments.
| INCOME STATEMENT DATA | 31.12.2016 | CHANGE | ||
|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2015 | ABSOLUTE | % | |
| Net interest income | (22.868) | 47.639 | (70.507) | (148,0)% |
| Net commission income | (1.046) | (586) | (460) | 78,5% |
| Dividends and trading | 4.942 | 125.599 | (120.657) | (96,1)% |
| Net banking income | (18.972) | 172.652 | (191.624) | (111,0)% |
| Net value adjustments on receivables and other financial as sets |
(4.356) | (8.977) | 4.621 | (51,5)% |
| Net profit (loss) from financial activities | (23.328) | 163.675 | (187.003) | (114,3)% |
| QUARTERLY INCOME STATEMENT DATA | CHANGE | |||
|---|---|---|---|---|
| (in thousands of Euro) | 4th Q. 2016 | 4th Q. 2015 | ABSOLUTE | % |
| Net interest income | (12.193) | 4.740 | (16.933) | (357,2)% |
| Net commission income | (506) | (28) | (478) | 1.707,1% |
| Dividends and trading | 153 | 1.122 | (969) | (86,4)% |
| Net banking income | (12.546) | 5.834 | (18.380) | (315,0)% |
| Net value adjustments on receivables and other financial as sets |
(357) | (728) | 371 | (51,0)% |
| Net profit (loss) from financial activities | (12.903) | 5.106 | (18.009) | (352,7)% |
The sector's net banking income included the contribution of the securities portfolio to net interest income, which totalled 12,1 million Euro compared to 190,0 million Euro in the prior-year period. The decline was attributable to the reduced stock of securities in the portfolio (374,2 million Euro at 31 December 2016 compared to 3.221,5 million Euro at the end of 2015).
During the period, it made 5,5 million Euro in gains on the sale of securities.
As for Rendimax retail funding (4,5 billion Euro, compared to 3,1 billion Euro at 31 December 2015), the relevant cost amounted to 1,50%, compared to 1,24% in December 2015. The increase was the result of the new 3-, 4-, and 5-year maturities as well as some promotional campaigns aiming to boost funding levels ahead of the finalisation of the former GE Capital Interbanca Group acquisition.
Net value adjustments on available for sale financial assets, totalling 4,4 million Euro at 31 December 2016 (9,0 million Euro in the prior-year period), referred to impairment losses recognised on unlisted equity instruments that were found to be impaired.
| STATEMENT OF FINANCIAL POSITION | CHANGE | ||||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2015 | ABSOLUTE | % | |
| Available for sale financial assets | 374.229 | 3.221.533 | (2.847.304) | (88,4)% | |
| Held to maturity financial assets | - | - | - | n.a. | |
| Due from banks | 1.393.358 | 95.352 | 1.298.006 | 1361,3% | |
| Loans to customers | 7.561 | 103.997 | (96.436) | (92,7)% | |
| Due to banks | 503.964 | 662.985 | (159.021) | (24,0)% | |
| Due to customers | 5.045.136 | 5.487.476 | (442.340) | (8,1)% |
The loans to customers of the Governance and Services sector amounted to 7,6 million Euro, -92,7% from the prior-year, and essentially reflect the balance of margin lending related to repurchase agreements on the MTS platform with Cassa di Compensazione e Garanzia as counterparty. The decline was the result of the downsizing of the securities portfolio.
| STATEMENT OF FINANCIAL POSITION | CHANGE | ||||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2015 | ABSOLUTE | % | |
| Bad loans | - | - | - | - | |
| Unlikely to pay | - | - | - | - | |
| Past due loans | - | - | - | - | |
| Total net non-performing exposures to customers | - | - | - | - | |
| Net performing loans | 7.561 | 103.997 | (96.436) | (92,7)% | |
| Total on-balance-sheet loans to customers | 7.561 | 103.997 | (96.436) | (92,7)% |
| KPI | 31.12.2016 | 31.12.2015 | CHANGE | ||
|---|---|---|---|---|---|
| ABSOLUTE | % | ||||
| Total RWA per segment | 263.512(2) | 25.256 (1) | 238.256 | 943,4% |
(1) Data restated after initial publication.
(2) The Governance and Services sector's RWAs include in 2016 the investment in IFIS Rental Services, a non-financial company consolidated using the equity method and that is not part of the Banking Group for supervisory purposes.
As described in the Introductory notes on how to read the data, the tables in this paragraph include a comparison of 2016 with the prior year excluding all effects attributable to the acquisition of the former GE Capital Interbanca Group (the data are presented in a column named "31.12.2016 normalised"), as if the business combination never took place.
| STATEMENT OF FINANCIAL POSITION | AMOUNTS AT | NORMALISED CHANGE | ||||
|---|---|---|---|---|---|---|
| HIGHLIGHTS (in thousands of Euro) |
31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % | |
| Financial assets held for trading | 47.393 | 397 | 259 | 138 | 53,3% | |
| Available for sale financial assets | 374.229 | 325.050 | 3.221.533 | (2.896.483) | (89,9)% | |
| Due from banks | 1.393.358 | 1.194.420 | 95.352 | 1.099.068 | 1152,6% | |
| Loans to customers | 5.928.212 | 3.638.176 | 3.437.136 | 201.040 | 5,8% | |
| Property, plant and equipment and intangible as sets |
125.329 | 77.953 | 59.333 | 18.620 | 31,4% | |
| Other assets | 830.624 | 225.447 | 144.107 | 81.340 | 56,4% | |
| Total assets | 8.699.145 | 5.461.443 | 6.957.720 | (1.496.277) | (21,5)% | |
| Due to banks | 503.964 | 509.066 | 662.985 | (153.919) | (23,2)% | |
| Due to customers | 5.045.136 | 4.095.416 | 5.487.476 | (1.392.060) | (25,4)% | |
| Debt securities issued | 1.488.556 | - | - | - | n.a. | |
| Financial liabilities held for trading | 48.478 | 2.031 | 21 | 2.010 | 9571,4% | |
| Other liabilities | 394.228 | 235.009 | 233.771 | 1.238 | 0,5% | |
| Equity | 1.218.783 | 619.921 | 573.467 | 46.454 | 8,1% | |
| Total liabilities and equity | 8.699.145 | 5.461.443 | 6.957.720 | (1.496.277) | (21,5)% |
The financial assets and liabilities held for trading outstanding at 31 December 2016 were incorporated with the acquisition of the former GE Capital Interbanca Group and referred to interest rate derivatives that Interbanca S.p.A. negotiated with its Corporate clients up to 2009 to provide them with instruments to hedge risks such as fluctuations in interest rates. In order to remove market risk, all outstanding transactions are hedged with "back to back" trades, in which Interbanca assumed a position opposite to the one sold to corporate clients with independent market counterparties. In addition, there were 397 thousand Euro worth of cross currency swaps with other banks.
Available for sale (AFS) financial assets, which include debt and equity securities, stood at 374,2 million Euro at 31 December 2016, -88,4% compared to 3.221,5 million Euro at the end of 2015. The normalised balance of AFS securities totalled 325,0 million Euro. The valuation reserve, net of taxes, was positive to the tune of 1,5 million Euro at 31 December 2016 (11,7 million Euro at 31 December 2015).
At 31 December 2016, the debt securities portfolio amounted to 353,2 million Euro, down 68,1% from 31 December 2015 (3.216,8 million Euro)—largely because of the 2,9 billion Euro worth of securities sold during the year, which resulted in a 5,5 million Euro gain.
Here below is the breakdown by maturity of the debt securities held.
| Issuer/Maturity | 3rd Q. 2017 | 2nd Q. 2019 | 2nd Q. 2020 | Overall total |
|---|---|---|---|---|
| Government bonds | 270.292 | 30.117 | 52.742 | 353.151 |
| % of total | 76,5% | 8,5% | 15,0% | 100,0% |
Available for sale financial assets include equity securities relating to non-controlling interests in unlisted companies, amounting to 17,1 million Euro (+264,6% compared to 31 December 2015). The increase was the result of the 15,1 million Euro contribution from the former Interbanca group (the normalised amount is 2,0 million Euro) and the 1,5 million Euro acquisition of an interest in Cassa di Risparmio di Cesena after paying a contribution to Italy's Interbank Deposit Protection Fund (FITD, Fondo Interbancario di Tutela dei Depositi) as payment for the bank's capital increase. The fair value of this interest is the subscription price assigned to the relevant capital increase. This interest was treated for accounting, tax and reporting purposes in accordance with the Italian Banking Association's communication of 4 August 2016 as confirmed by the Bank of Italy's technical note of 26 October 2016. During the year, the Group recognised a 4,4 million Euro write-down of the equity interests in two investees after they were tested for impairment.
Available for sale financial assets include also 3,9 million Euro in UCITS units deriving from the acquisition of the former GE Capital Interbanca Group.
At 31 December 2016, receivables due from banks totalled 1.393,4 million Euro, compared to 95,4 million Euro at 31 December 2015. This excess liquidity ensures the margin required to carry out banking operations as well as the funds necessary to seize potential market opportunities.
Loans to customers totalled 5.928,2 million Euro, up 72,5% from 3.437,1 million Euro at the end of 2015, thanks largely to the contribution from the GE Capital Interbanca Group: the normalised balance of loans to customers was 3.638,2 million Euro (+5,8% compared to 2015).
Specifically, the NPL Area's receivables were up +58,6% as a result of new acquisitions as well as the reclassification to amortised cost of a sizeable portion of the portfolio previously recognised at cost pending the completion of the preparations for said reclassification. Also the loans of the trade receivables segment were up (+8,6%). Corporate Banking and Leasing, the new sectors born from the acquisition of the former GE Capital Interbanca Group, contributed 905,7 and 1.235,6 million Euro, respectively. Tax receivables were down as a result of the significant collections recognised during the year. Receivables in the Governance and Services sector fell by 92,7% because of the decrease in margin lending related to repurchase agreements on the MTS platform with Cassa Compensazione e Garanzia as counterparty—the result of the mentioned reduction of the portfolio of refinanceable securities.
The breakdown of loans to customers was as follows: 16,9% are due from the Public Administration and 83,1% from the private sector (compared to 30,4% and 69,6% at 31 December 2015).
There are no major risks concerning this item.
| LOANS TO CUSTOMERS: | AMOUNTS AT | CHANGE | ||
|---|---|---|---|---|
| BREAKDOWN BY SEGMENT (in thousands of Euro) |
31.12.2016 | 31.12.2015 | ABSOLUTE | % |
| Trade receivables | 3.092.488 | 2.848.124 | 244.364 | 8,6% |
| - of which non-performing | 201.012 | 128.715 | 72.297 | 56,2% |
| Corporate Banking | 905.682 | n.a. | n.a. | n.a. |
| - of which non-performing | 171.670 | n.a. | n.a. | n.a. |
| Leasing | 1.235.638 | n.a. | n.a. | n.a. |
| - of which non-performing | 37.150 | n.a. | n.a. | n.a. |
| NPL Area | 562.146 | 354.352 | 207.794 | 58,6% |
| - of which non-performing | 562.130 | 354.331 | 207.799 | 58,6% |
| Tax Receivables | 124.697 | 130.663 | (5.966) | (4,6)% |
| - of which non-performing | 199 | - | 199 | n.a. |
| Governance and Services | 7.561 | 103.997 | (96.436) | (92,7)% |
| - of which with Cassa di Compensazione e Garanzia | 4.748 | 103.636 | (98.888) | (95,4)% |
| Total loans to customers | 5.928.212 | 3.437.136 | 2.491.076 | 72,5% |
| - of which non-performing | 972.161 | 483.046 | 489.115 | 101,3% |
Total net non-performing exposures, which are significantly affected by the receivables of the NPL Area, amounted to 972,2 million Euro in December 2016, compared to 483,0 million Euro at the end of 2015 (+55,2%).
Here below is the breakdown of forborne exposures by segment.
| FORBEARANCE (in thousands of Euro) |
TRADE RECEIVABLES |
CORPORATE BANKING |
LEASING | NPL AREA | TAX RECEIVABLES |
CONS. TOTAL |
|---|---|---|---|---|---|---|
| Bad loans | ||||||
| Amounts at 31.12.2016 | 2.439 | 5.587 | 730 | 33.550 | - | 42.306 |
| Amounts at 31.12.2015 | 371 | n.a. | n.a. | 15.064 | - | 15.435 |
| % Change | 557,4% | n.a. | n.a. | 122,7% | - | 174,1% |
| Unlikely to pay | - | |||||
| Amounts at 31.12.2016 | 19.312 | 98.575 | 6.258 | 53.368 | - | 177.513 |
| Amounts at 31.12.2015 | 14.414 | n.a. | n.a. | 19.309 | - | 33.723 |
| % Change | 34,0% | n.a. | n.a. | 176,4% | - | 426,4% |
| Past due loans | - | |||||
| Amounts at 31.12.2016 | - | 1.457 | 2.302 | - | - | 3.759 |
| Amounts at 31.12.2015 | 5.300 | n.a. | n.a. | - | - | 5.300 |
| % Change | (100,0)% | n.a. | n.a. | - | - | (29,1)% |
| Performing loans | - | |||||
| Amounts at 31.12.2016 | 6.955 | 35.882 | - | 15 | - | 42.852 |
| Amounts at 31.12.2015 | 2.954 | n.a. | n.a. | 5 | - | 2.959 |
| % Change | 135,4% | n.a. | n.a. | 200,0% | - | 1348,2% |
| CREDIT QUALITY (in thousands of Euro) |
TRADE RE CEIVABLES |
CORPO RATE BANK ING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. TO TAL |
|---|---|---|---|---|---|---|---|
| Bad loans | |||||||
| Amounts at 31.12.2016 | 31.692 | 27.260 | 6.177 | 320.612 | 5 | - | 385.746 |
| Amounts at 31.12.2015 | 30.950 | n.a. | n.a. | 159.336 | - | - | 190.286 |
| % Change | 2,4% | n.a. | n.a. | 101,2% | n.a. | - | 102,7% |
| Unlikely to pay | - | ||||||
| Amounts at 31.12.2016 | 50.900 | 142.741 | 13.622 | 241.518 | 194 | - | 448.975 |
| Amounts at 31.12.2015 | 39.551 | n.a. | n.a. | 194.995 | - | - | 234.546 |
| % Change | 28,7% | n.a. | n.a. | 23,9% | n.a. | - | 91,4% |
| Past due loans | - | ||||||
| Amounts at 31.12.2016 | 118.420 | 1.669 | 17.351 | - | - | - | 137.440 |
| Amounts at 31.12.2015 | 58.214 | n.a. | n.a. | - | - | - | 58.214 |
| % Change | 103,4% | n.a. | n.a. | - | - | - | 136,1% |
| Total net non-performing exposures | |||||||
| Amounts at 31.12.2016 | 201.012 | 171.670 | 37.150 | 562.130 | 199 | - | 972.161 |
| Amounts at 31.12.2015 | 128.715 | n.a. | n.a. | 354.331 | - | - | 483.046 |
| % Change | 56,2% | n.a. | n.a. | 58,6% | n.a. | - | 101,3% |
| Net performing loans to customers | - | ||||||
| Amounts at 31.12.2016 | 2.891.476 | 734.012 | 1.198.488 | 16 | 124.498 | 7.561 | 4.956.051 |
| Amounts at 31.12.2015 | 2.719.409 | n.a. | n.a. | 21 | 130.663 | 103.997 | 2.954.090 |
| % Change | 6,3% | n.a. | n.a. | (23,8)% | (4,7)% | (92,7)% | 67,8% |
| Total on-balance-sheet loans to cus tomers |
|||||||
| Amounts at 31.12.2016 | 3.092.488 | 905.682 | 1.235.638 | 562.146 | 124.697 | 7.561 | 5.928.212 |
| Amounts at 31.12.2015 | 2.848.124 | n.a. | n.a. | 354.352 | 130.663 | 103.997 | 3.437.136 |
| % Change | 8,6% | n.a. | n.a. | 58,6% | (4,6)% | (92,7)% | 72,5% |
Intangible assets totalled 15,0 million Euro, compared to 7,2 million Euro at 31 December 2015 (+108,9%).
The item refers to software (14,2 million Euro) as well as goodwill (799 thousand Euro) arising from the consolidation of the investment in IFIS Finance Sp.Z o.o.
Property, plant and equipment and investment property amounted to 110,3 million, up +111,5% from 52,2 million Euro at the end of 2015; the significant increase was largely due to the contribution from the former GE Capital Interbanca Group as well as the capitalisation of the costs for the restructuring of the property in Florence, which in 2016 became the new headquarters of the NPL business area. The normalised balance of property, plant and equipment and investment property totalled 64,0 million Euro, +22,8% from the end of 2015.
At the end of the period, the properties recognised under property, plant and equipment and investment property included the important historical building "Villa Marocco", located in Mestre – Venice and housing Banca IFIS's registered office, as well as, following the acquisition of the former GE Capital Interbanca Group, two buildings in Milan, housing the registered offices of Interbanca S.p.A. and some Group companies.
Since Villa Marocco is a luxury property, it is not amortised, but it is tested for impairment at least annually. To this end, they are appraised by experts specialising in luxury properties. During the year, there were no indications requiring to test the assets for impairment.
These items include current and deferred tax assets and liabilities.
The following table shows the breakdown of current tax assets by type.
| CURRENT TAX ASSETS | AMOUNTS AT | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % |
| Irap (regional tax on productive activities) | 10.728 | 8.922 | - | 8.922 | - |
| Ires (corporate income tax) | 14.078 | 1.011 | 1.035 | (24) | (2,3)% |
| Ires on sale of receivables | 21.278 | 21.278 | 21.278 | - | - |
| Credits from DTA Conversion | 41.737 | - | - | - | - |
| Others | 15 | 15 | 2 | 13 | 650,0% |
| Total current tax assets | 87.836 | 31.226 | 22.315 | 8.911 | 39,9% |
Current tax assets, totalling 87,8 million Euro, included 41,7 million Euro in tax credits from the conversion of deferred tax assets (DTAs) in accordance with Italian Law no. 214/2011, 24,7 million Euro in IRES/IRAP credits claimed in the tax return, and 21,2 million Euro in credits acquired from third parties.
The main types of deferred tax assets are set out below:
| DEFERRED TAX ASSETS | AMOUNTS AT | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % |
| Differences from PPA | 253.030 | - | - | - | n.a. |
| Loans to customers (Law 214/2011) | 192.310 | - | - | - | n.a. |
| Loans to customers | 42.978 | 36.184 | 38.058 | (1.874) | (4,9)% |
| Equipment rental | 1.460 | - | - | - | n.a. |
| Provisions for risks and charges | 1.209 | 1.209 | 561 | 648 | 115,5% |
| Others | 2.193 | 972 | 803 | 169 | 21,0% |
| Total deferred tax assets | 493.180 | 38.365 | 39.422 | (1.057) | (2,7)% |
Deferred tax assets, amounting to 493,1 million Euro, included 253 million Euro in misalignments found during the acquisition of the former GE Capital Interbanca Group (PPA) and 228,5 million Euro in value adjustments on receivables that can be deducted in the following years.
Current tax liabilities refer exclusively to IRAP payables, as showed below.
| CURRENT TAX LIABILITIES | AMOUNTS AT | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % |
| IRAP Balance | 491 | - | 4.093 | (4.093) | (100,0)% |
| Others | - | - | 60 | (60) | (100,0)% |
| Total current tax liabilities | 491 | - | 4.153 | (4.153) | (100,0)% |
The main types of deferred tax liabilities are shown below:
| DEFERRED TAX LIABILITIES | AMOUNTS AT | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % |
| Loans to customers | 13.293 | 13.293 | 15.257 | (1.964) | (12,9)% |
| Property, plant and equipment | 9.433 | 325 | 309 | 16 | 5,2% |
| Available for sale securities | 394 | 394 | 5.770 | (5.376) | (93,2)% |
| Others | 1.315 | 407 | 60 | 347 | 578,3% |
| Total deferred tax liabilities | 24.434 | 14.419 | 21.396 | (6.977) | (32,6)% |
Other assets amounted to 249,6 million Euro at 31 December 2016 (+203,0% from 31 December 2015). The normalised balance was 155,8 million Euro, up 89,3% from December 2015.
This line item included 7,2 million Euro in receivables due from Italian tax authorities for payments on account (stamp duty and withholding taxes), 27,9 million Euro in funds placed in an escrow account pending the resolution of a dispute, and 15,0 million Euro in VAT credits claimed. The item also included a 43,9 million Euro receivable due from the parent company La Scogliera S.p.A. deriving from the tax consolidation regime. Finally, it also included 26,9 million Euro in receivables due from the buyers of NPL portfolios.
At the end of the period, other liabilities totalled 337,3 million Euro (64,9% compared to December 2015). The normalised balance was 209,0 million Euro, +2,2% from 31 December 2015. The most significant items referred largely to amounts due to customers that have not yet been credited.
| FUNDING | AMOUNTS AT | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % |
| Due to customers: | 5.045.136 | 4.095.416 | 5.487.476 | (1.392.060) | (25,4)% |
| Repurchase agreements | 270.314 | 270.314 | 2.278.983 | (2.008.669) | (88,1)% |
| Rendimax | 4.447.192 | 3.656.836 | 3.048.357 | 608.479 | 20,0% |
| Contomax | 72.068 | 69.916 | 64.912 | 5.004 | 7,7% |
| Other payables | 255.562 | 98.350 | 95.224 | 3.126 | 3,3% |
| Due to banks | 503.964 | 509.066 | 662.985 | (153.919) | (23,2)% |
| Eurosystem | - | - | 119.792 | (119.792) | (100,0)% |
| Repurchase agreements | 50.886 | 50.886 | 384.225 | (333.339) | (86,8)% |
| Other payables | 453.078 | 458.180 | 158.968 | 299.212 | 188,2% |
| Outstanding securities | 1.488.556 | - | - | - | n.a. |
| Total funding | 7.037.656 | 4.604.482 | 6.150.461 | (1.545.979) | (25,1)% |
Total funding, which amounted to 7.037,7 million Euro at 31 December 2016, up 14,4% compared to 31 December 2015, is represented for 71,7% by Payables due to customers (compared to 89,2% at 31 December 2015), for 7,2% by Payables due to banks (compared to 10,8% at 31 December 2015), and for 21,1% by Outstanding securities (zero at 31 December 2015). The normalised balance of funding totalled 4.604,5 million Euro, -25.1% from 31 December 2015.
Payables due to customers at 31 December 2016 totalled 5.045,1 million Euro (-8,1% compared to 31 December 2015). The decrease was the result of the settlement of 2.279,0 million Euro worth of repurchase agreements with underlying government bonds and Cassa di Compensazione e Garanzia as counterparty outstanding at 31 December 2015, which were followed by 270,3 million Euro worth of purchases. Meanwhile, retail funding rose to 4.519,3 million Euro at 31 December 2016, including 4.447,2 from rendimax and 72,1 million Euro from contomax, compared to 3.113,3 million Euro at 31 December 2015 (+45,2%). This was the result of, among other things, the newly introduced 3-, 4- and 5-year maturities as well as some promotional campaigns aiming to boost funding levels ahead of the finalisation of the former GE Capital Interbanca Group acquisition. The Bank still bears proportional stamp duty costs on rendimax and contomax, which amount to 0,20%.
Payables due to banks, totalling 504,0 million Euro (compared to 663,0 million Euro in December 2015), were down 24,0% because of the early repayment of the TLTRO loan received in December 2014. Since market conditions have changed, the Bank can now raise funding on more favourable terms than said loan. Repurchase agreements with underlying governments bonds outstanding at 31 December 2016 totalled 50,9 million Euro, down from 384,2 million Euro in December 2015 after the Bank settled them and entered into new transactions.
Also term deposits at other banks rose to 453,1 million Euro from 159,0 million Euro at the end of the previous year (+185,0%).
Outstanding securities amounted to 1.448,6 million Euro. They included 83,2 million Euro in bond loans and 725 thousand Euro in certificates of deposits issued by Interbanca S.p.A.,
as well as 1.404,6 million Euro in notes issued by the special purpose vehicles as part of three securitisations launched at the end of 2016, as detailed in Part E of the Notes to the Consolidated Financial Statements.
| PROVISIONS FOR RISKS AND CHARGES | AMOUNTS AT | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % |
| Legal disputes | 9.577 | 1.855 | 1.513 | 342 | 22,6% |
| Tax dispute | - | - | 197 | (197) | (100,0)% |
| Other provisions | 14.741 | - | 461 | (461) | (100,0)% |
| Total provisions for risks and charges | 24.318 | 1.855 | 2.171 | (316) | (14,6)% |
Here below is the breakdown of the provision for risks and charges at the end of the year by type of dispute compared with the prior year. For the sake of clarity, the provisions deriving from the acquisition of the former GE Capital Interbanca Group are reported separately.
The provision outstanding at 31 December 2016, amounting to 1,9 million Euro, included 1,8 million Euro for 17 disputes concerning the Trade Receivables segment (the plaintiffs seek 18,0 million Euro in damages), and 100 thousand Euro for 8 disputes concerning the NPL Area segment.
The provision outstanding at 31 December 2016, amounting to 7,7 million Euro, included 250 thousand Euro for a dispute involving IFIS Factoring (the plaintiffs seek 500 thousand Euro in damages), 2,0 million Euro for 26 disputes concerning IFIS Leasing (the plaintiffs seek 4,3 million Euro in damages), and 5,5 million Euro for 7 disputes involving Interbanca (the plaintiffs seek 50,6 million Euro in damages).
The provision for risks at the end of 2015, amounting to 197 thousand Euro, referred to the amount set aside for the verification notices received by the Bank, which had filed an appeal against them with the competent Tax Commission. In July 2016, the Bank reached a full and final settlement with the Italian Revenue Agency, and subsequently paid the agreed amount to settle the above verification notices.
The provision at 31 December 2016 included 2,5 million Euro in the amount set aside for commissions to be paid in early 2017 in order to buy back the senior tranche of the leasing securitisation (eligible securities).
The provision outstanding at 31 December 2015 referred to the amount set aside as per the request of Italy's Interbank Deposit Protection Fund (FITD, Fondo Interbancario di Tutela dei Depositi), of which Banca IFIS is a member. In a letter dated 16 September 2014, the FITD approved another rescue loan (in addition to the measures announced on 9 January 2014 and 17 July 2014) to Banca Tercas, placed under Special Administration. The relevant potential obligation for Banca IFIS amounted to 0,5 million Euro. Therefore, in 2014 Banca IFIS allocated said amount to the provisions for risks and charges. Since the underlying commitments have expired, the Bank has recognised the amount previously set aside through profit or loss.
The provision outstanding at 31 December 2016, amounting to 12,3 million Euro, included 3,7 million Euro in personnel-related expenses and 8,6 million Euro in other provisions, including 3,5 million Euro for customer allowances and 3,8 million Euro as provision for risks on unfunded commitments.
See Part B of the Notes to the Consolidated Financial Statements, "provisions for risks and charges".
At 31 December 2016, consolidated Equity was 1.218,8 million Euro, compared to 573,5 million Euro at 31 December 2015 (+112,5%). The normalised equity totalled 619,9 million Euro, +8,1% from 31 December 2015. The breakdown of the item and the change compared to the previous year are detailed in the tables below.
| EQUITY: BREAKDOWN | AMOUNTS AT | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2016 NORMALISED |
31.12.2015 | ABSOLUTE | % |
| Share capital | 53.811 | 53.811 | 53.811 | - | 0,0% |
| Share premiums | 101.776 | 101.776 | 58.900 | 42.876 | 72,8% |
| Valuation reserves: | (5.445) | (6.109) | 5.739 | (11.848) | (206,4)% |
| - AFS securities | 1.534 | 955 | 11.677 | (10.722) | (91,8)% |
| - Post-employment benefits | (123) | (208) | (167) | (41) | 24,6% |
| - exchange differences | (6.856) | (6.856) | (5.771) | (1.085) | 18,8% |
| Reserves | 383.835 | 383.835 | 298.856 | 84.979 | 28,4% |
| Treasury shares | (3.187) | (3.187) | (5.805) | 2.618 | (45,1)% |
| Non-controlling interests | 48 | - | - | - | n.a. |
| Profit for the period | 687.945 | 89.795 | 161.966 | (72.171) | (44,6)% |
| Equity | 1.218.783 | 619.921 | 573.467 | 46.454 | 8,1% |
| EQUITY: CHANGES (in thousands of Euro) |
YEAR 2016 |
|---|---|
| Equity at 31.12.2015 | 573.467 |
| Increases: | 696.886 |
| Profit for the year | 687.945 |
| Sale/grant of treasury instruments | 8.681 |
| Change in valuation reserve: | 44 |
| - Post-employment benefits | 44 |
| Other changes | 168 |
| Equity attributable to non-controlling interests | 48 |
| Decreases: | 51.570 |
| Dividends distributed | 40.342 |
| Change in valuation reserve: | 11.228 |
| - AFS securities | 10.143 |
| - exchange differences | 1.085 |
| Equity at 31.12.2016 | 1.218.783 |
The change in the valuation reserve for AFS securities recognised in the period was the result of the sale of part of the portfolio, which caused the Bank to reduce the reserve by 5,5 million Euro.
The change in the valuation reserve for exchange differences refers mainly to exchange differences deriving from the consolidation of the subsidiary IFIS Finance Sp. Z o.o..
| OWN FUNDS AND CAPITAL ADEQUACY RATIOS | AMOUNTS AT | ||
|---|---|---|---|
| (in thousands of Euro) | 31.12.2016 | 31.12.2015 (2) | |
| Common equity Tier 1 Capital(1) (CET1) | 1.031.163 | 464.316 | |
| Tier 1 Capital (T1) | 1.048.606 | 473.956 | |
| Total own funds | 1.071.929 | 486.809 | |
| Total RWA | 7.003.305 | 3.264.088 | |
| Common Equity Tier 1 Ratio | 14,72% | 14,22% | |
| Tier 1 Capital Ratio | 14,97% | 14,52% | |
| Total Own Funds Capital Ratio | 15,31% | 14,91% |
(1) Common Equity Tier 1 capital includes the profit for the period net of estimated dividends.
(2) Total consolidated own funds (amounting to 486.809 thousands Euro) differ from the amount reported in the consolidated financial statements for the year ended 31 December 2015 (501.809 thousands Euro) due to the 15 million Euro dividend payout approved by the Shareholders' Meeting of the parent company La Scogliera S.p.A. on 23 March 2016. The consolidated supervisory reports at 31 December 2015, as well as the relevant capital adequacy ratios, had already been adjusted at the end of March 2016 to account for said dividend payout. The data on consolidated Own Funds and capital adequacy ratios account for the impact of said distribution.
Consolidated own funds, risk-weighted assets and solvency ratios at 31 December 2016 were determined based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013.
Article 19 of the CRR requires to include the unconsolidated Holding of the banking group in prudential consolidation. The capital adequacy ratios of the Banca IFIS Group alone, presented exclusively for information purposes, would be as showed in the following table.
| OWN FUNDS AND CAPITAL ADEQUACY RATIOS: | AMOUNTS AT | |||
|---|---|---|---|---|
| BANCA IFIS GROUP SCOPE (in thousands of Euro) |
31.12.2016 | 31.12.2015 | ||
| Common equity Tier 1 Capital(1) (CET1) | 1.099.249 | 514.453 | ||
| Tier 1 Capital (T1) | 1.099.249 | 514.453 | ||
| Total own funds | 1.099.401 | 514.453 | ||
| Total RWA | 6.999.061 | 3.261.103 | ||
| Common Equity Tier 1 Ratio | 15,71% | 15,78% | ||
| Tier 1 Capital Ratio | 15,71% | 15,78% | ||
| Total Own Funds Capital Ratio | 15,71% | 15,78% |
(1) Common Equity Tier 1 capital includes the profit for the period net of estimated dividends.
The measures concerning own funds provide for the gradual phase-in of a new regulatory framework, with a transitional period lasting until 2017 during which some elements that will be accounted for or deducted in full once the provisions become effective will have only a limited impact.
The Banca IFIS Group, in accordance with the transitional provisions in the Bank of Italy's Circular no. 285 of 17 December 2013 as amended, calculated its own funds at 31 December 2016 by excluding the unrealised gains referring to the exposures to central governments classified under "Available for sale financial assets" as per IAS 39, resulting in a net positive amount of 391 thousand Euro (positive 5,9 million Euro at 31 December 2015).
As described in the Introductory notes on how to read the data, the tables in this paragraph include a comparison of 2016 with the prior year excluding all effects attributable to the acquisition of the former GE Capital Interbanca Group (the data are presented in a column named "31.12.2016 normalised"), as if the business combination never took place.
Please note that the former GE Capital Interbanca Group contributed to the 2016 results only in the month of December.
Net banking income totalled 358,6 million Euro, down 12,1% from 408,0 million Euro in the prior year. Normalising the results for the material impacts from the acquisition of the former GE Capital Interbanca Group in 2016, net banking income amounted to 364,6 million Euro.
The acquisition added 6,0 million Euro to net banking income, and this amount mainly included: the contribution from the receivables of the new Corporate Banking and Leasing sectors, as well as the positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiaries over time; the costs related to the funding for the acquisition of the former GE Capital Interbanca Group, which concerned the increase in Rendimax funding volumes and the securitisations carried out at the end of 2016.
The table below shows the results for the year excluding the above effects: net banking income fell 10,6% net of the gain on the sale of financial assets realised in April 2015 as part of the rebalancing of the government bond portfolio (124,5 million Euro), while the Group's net banking income was up 28,6%.
In 2016, net banking income rose as a result of, among other things, the 44,5 million Euro gain on the sale of some portfolios of receivables of the NPL Area and the 15,8 million Euro positive effect recognised under interest income from the implementation of the new model to estimate the cash flows of health service receivables.
| YEAR | NORMALISED CHANGE | ||||
|---|---|---|---|---|---|
| NET BANKING INCOME (in thousands of Euro) |
2016 | 31.12.2016 NORMALISED |
2015 | ABSOLUTE | % |
| Net interest income | 268.183 | 262.312 | 208.626 | 53.686 | 25,7% |
| Net commission income | 41.111 | 52.807 | 58.783 | (5.976) | (10,2)% |
| Net result from trading | (702) | (553) | (78) | (475) | 609,0% |
| Profit (loss) from sale or buyback of receivables | 44.529 | 44.529 | 14.948 | 29.581 | 197,9% |
| Profit from sale or buyback of financial assets | 5.478 | 5.495 | 125.679 | (120.184) | (95,6)% |
| Net banking income | 358.599 | 364.590 | 407.958 | (43.368) | (10,6)% |
In the fourth quarter, net banking income stood at 97,3 million Euro, up from 76,8 million Euro in the prior-year period (+26,7%). The normalised net banking income for the fourth quarter of 2016 was up 34,5% to 103,3 million Euro.
Net interest income rose from 208,6 million Euro at 31 December 2015 to 268,2 million Euro at 31 December 2016 (+28,5%). Interest expense included 10,7 million Euro in costs associated with the acquisition, including the differential funding cost on Rendimax deposits and the funding cost of the securitisation. The normalised net interest income was 263,3 million Euro, up 25,7% from 31 December 2015. Net commission income totalled 41,1 million Euro, down from 31 December 2015 (-30,1%). The normalised amount was 52,8 million Euro, down 10,2%.
Commission income, totalling 59,4 million Euro (normalised amount: 58,1 million Euro), compared to 63,2 million Euro at 31 December 2015, came primarily from factoring commissions on the turnover generated by individual customers (with or without recourse, in a flat or monthly scheme) as well as from other fees usually charged to customers for services.
Commission expense, totalling 18,3 million Euro (4,4 at 31 December 2015), included 12,5 million Euro in up-front commissions for the factoring, leasing and lending securitisations carried out in December 2016; the normalised amount was 5,3 million Euro and referred largely to approved banks' mediation activities, the work of other credit intermediaries, and commissions paid to correspondent banks and factors.
The gain on the sale of receivables, totalling 44,5 million Euro, arose from the sale of a number of portfolios of receivables of the NPL Area. The item included a 279 thousand Euro loss on the repurchase of some portfolios sold in late 2015.
The gain on the sale of financial assets arose from the sale of part of the government bond portfolio completed in the first half of 2016, resulting in a 5,5 million Euro gain.
The Group's net profit from financial activities totalled 299,4 million Euro, compared to 373,7 million Euro at 31 December 2015 (-19,9%). The net profit from financial activities normalised for the acquisition totalled 306,9 million Euro.
The table below shows the results for the year excluding the above effects: net profit from financial activities fell 17,9% net of the gain on the sale of financial assets realised in April 2015 as part of the rebalancing of the government bond portfolio (124,5 million Euro), while the Group's net profit from financial activities was up 23,2%.
| FORMATION OF NET PROFIT FROM | YEAR | NORMALISED CHANGE | |||
|---|---|---|---|---|---|
| FINANCIAL ACTIVITIES (in thousands of Euro) |
2016 | 31.12.2016 NORMALISED |
2015 | ABSOLUTE | % |
| Net banking income | 358.599 | 364.590 | 407.958 | (43.368) | (10,6)% |
| Net impairment losses on: | (59.233) | (57.651) | (34.250) | (23.401) | 68,3% |
| loans and receivables | (54.882) | (53.295) | (25.273) | (28.022) | 110,9% |
| available for sale financial assets | (4.356) | (4.356) | (8.977) | 4.621 | (51,5)% |
| other financial transactions | 5 | - | - | - | n.a. |
| Net profit (loss) from financial activities | 299.366 | 306.939 | 373.708 | (66.769) | (17,9)% |
Net value adjustments on receivables totalled 54,9 million Euro (compared to 25,3 million Euro at 31 December 2015, +117,2%). 20,3 million Euro referred to Trade Receivables, 32,6 million Euro to the NPL Area,1,5 million Euro to the Leasing sector, and 0,4 million Euro to Tax Receivables. As for net value adjustments on NPL receivables, they referred to positions for which trigger events occurred, causing the position to become impaired under the adopted measurement model and the relevant accounting policy, as detailed in Contribution of business segments.
Net value adjustments on available for sale financial assets, totalling 4,4 million Euro at 31 December 2016 (9,0 million Euro in the prior-year period), referred to impairment losses recognised on unlisted equity instruments that were found to be impaired.
In the fourth quarter, net profit from financial activities totalled 81,2 million Euro (compared to 68,7 million Euro in the fourth quarter of 2015).
Profit for the year , including 40 thousand Euro attributable to non-controlling interests, amounted to 688,0 million Euro, compared to 162,0 million Euro in 2015, up 324,7%. Normalising for the business combination, the profit for the year totalled 89,8 million Euro.
The impact of the acquisition of the former GE Capital Interbanca Group on the Banca IFIS Group's profit for the year mainly referred to the 623,6 million Euro gain on bargain purchase recognised under operating costs.
| YEAR | NORMALISED CHANGE | ||||
|---|---|---|---|---|---|
| FORMATION OF PROFIT FOR THE YEAR (in thousands of Euro) |
2016 | 31.12.2016 NORMALISED |
2015 | ABSOLUTE | % |
| Net profit (loss) from financial activities | 299.366 | 306.939 | 373.708 | (66.769) | (17,9)% |
| Operating costs | 421.160 | (172.161) | (128.119) | (44.042) | 34,4% |
| Pre-tax profit from continuing operations | 720.526 | 134.778 | 245.589 | (110.811) | (45,1)% |
| Income tax expense | (32.541) | (44.983) | (83.623) | 38.640 | (46,2)% |
| Profit for the period | 687.985 | 89.795 | 161.966 | (72.171) | (44,6)% |
| Non-controlling interests | 40 | - | - | - | n.a. |
| Parent Company profit for the year | 687.945 | 89.795 | 161.966 | (72.171) | (44,6)% |
The cost/income ratio based on the normalised income statement totalled 47,2%, compared to 31,4% at 31 December 2015.
| YEAR | NORMALISED CHANGE | ||||
|---|---|---|---|---|---|
| OPERATING COSTS (in thousands of Euro) |
2016 | 31/12/2016 NORMALISED |
2015 | ABSOLUTE | % |
| Personnel expenses | 65.878 | 56.621 | 48.342 | 8.279 | 17,1% |
| Other administrative expenses | 126.276 | 106.343 | 78.828 | 27.515 | 34,9% |
| Allocations to provisions for risks and charges | 1.849 | (251) | 229 | (480) | (209,6)% |
| Net value adjustments on property, plant and equipment and intangible assets |
6.055 | 5.851 | 3.746 | 2.105 | 56,2% |
| Other operating charges (income) | (621.218) | 3.597 | (3.026) | 6.623 | (218,9)% |
| Total operating costs | (421.160) | 172.161 | 128.119 | 44.042 | 34,4% |
Personnel expenses rose 36,3% to 65,9 million Euro (48,3 million Euro in December 2015), and included 5,5 million Euro in costs deriving from the agreements with some top executives of the GE Capital Interbanca Group attributable to the previous management. Normalised personnel expenses totalled 56,6 million Euro (+17,1% from 2015) as a result of new hiring (190 staff added during 2016, compared
to 177 in 2015). The increase is consistent with the goal to strengthen some areas and services supporting the business—especially in the NPL Area sector—and the scenario in which the Group operates. At December 2016, the Group had 1.323 employees, of which 479 from the former GE Capital Interbanca Group.
Other administrative expenses totalled 126,3 million Euro, up 60,2% from 78,8 million Euro at 31 December 2015 because of the costs incurred for the acquisition of the former GE Capital Interbanca Group (9,5 million Euro in legal and consulting fees) and the higher business volumes in the NPL Area. The relevant costs for collecting debts and gathering information on clients (29,4 and 9,4 million Euro, compared to 15,4 and 5,3 million Euro at 31 December 2015, respectively), are included in this item of the income statement. The cost of gathering information on clients specifically concern master data and employment information search costs, which are necessary to reclassify the positions being processed.
There was also an increase in the expenses related to the new organisation of business processes and the internal control system. The normalised balance of other administrative expenses totalled 106,3 million Euro, +34,9% from 31 December 2015.
| YEAR | NORMALISED CHANGE | ||||
|---|---|---|---|---|---|
| OTHER ADMINISTRATIVE EXPENSES (in thousands of Euro) |
2016 | 31.12.2016 NORMALISED |
2015 | ABSOLUTE | % |
| Expenses for professional services | 56.995 | 45.375 | 31.044 | 14.331 | 46,2% |
| Legal and consulting services | 25.511 | 14.347 | 13.948 | 399 | 2,9% |
| Auditing | 428 | 255 | 226 | 29 | 12,8% |
| Outsourced services | 31.056 | 30.773 | 16.870 | 13.903 | 82,4% |
| Direct and indirect taxes | 14.882 | 13.357 | 8.748 | 4.609 | 52,7% |
| Expenses for purchasing goods and other services |
54.399 | 47.611 | 39.036 | 8.575 | 22,0% |
| Customer information | 11.376 | 11.282 | 6.793 | 4.489 | 66,1% |
| Software assistance and hire | 5.550 | 4.988 | 3.267 | 1.721 | 52,7% |
| Postage of documents | 5.254 | 5.211 | 3.632 | 1.579 | 43,5% |
| Property expenses | 4.667 | 4.429 | 4.585 | (156) | (3,4)% |
| Advertising and inserts | 3.769 | 3.674 | 2.150 | 1.524 | 70,9% |
| Car fleet management and maintenance | 2.407 | 2.324 | 2.264 | 60 | 2,7% |
| Telephone and data transmission expenses | 1.923 | 1.841 | 1.441 | 400 | 27,8% |
| Employee travel | 1.665 | 1.613 | 1.120 | 493 | 44,0% |
| Other sundry expenses | 17.788 | 12.249 | 13.784 | (1.535) | (11,1)% |
| Total administrative expenses | 126.276 | 106.343 | 78.828 | 27.515 | 34,9% |
| Expense recoveries | (2.348) | (2.348) | (2.998) | 650 | (21,7)% |
| Total net other administrative expenses | 123.928 | 103.995 | 75.830 | 28.165 | 37,1% |
The subline item direct and indirect taxes included 7,6 million Euro (+25,9% compared to 31 December 2015) in stamp duty costs for retail funding, which the Banks continues bearing.
Other sundry expenses included the contributions due to Italy's Bank Resolution Fund and Interbank Deposit Protection Fund for the current year, totalling 10,5 million Euro compared to 10,6 million Euro in the previous year.
Net allocations to provisions for risks and charges totalled 1,8 million Euro (compared to 229 thousand Euro in December 2015). The amount at 31 December 2016 consisted of 274 and 68 thousand Euro in net provisions for disputes concerning Trade Receivables and the NPL Area, respectively, as well as the 2,5 million Euro set aside for the commissions to be paid in early 2017 in order to buy back the senior tranche of the leasing securitisation (eligible securities). In addition, the Bank recouped 251 thousand Euro after settling a tax dispute, 461 thousand Euro related to an allocation to the Interbank Deposit Protection Fund, 141 thousand Euro following the settlement of a dispute involving Interbanca, and 281 thousand Euro by reversing an excess provision related to the Leasing sector.
Other net operating income, totalling 621,2 million Euro (3,0 million Euro at 31 December 2015), included the 623,6 million Euro gain on bargain purchase from the acquisition of the former GE Capital Interbanca Group. The normalised amount included 3,6 million Euro in other net operating expenses, which refer for 2,8 million Euro to the expense incurred for a legal dispute and 1,5 million Euro to contractual penalties following the termination of two service contracts. The item also includes revenue from the recovery of expenses charged to third parties: the relevant cost is included in other administrative expenses, namely under legal expenses and indirect taxes.
Pre-tax profit for the period stood at 720,5 million Euro, compared to 245,6 million Euro at 31 December 2015. The normalised pre-tax profit was 134,8 million Euro.
Income tax expense amounted to 32,5 million Euro (45,0 million Euro normalised), compared to 83,6 million Euro at 31 December 2015. The Group's tax rate fell from 34,0% at 31 December 2015 to 4,5% at 31 December 2016; the total for 2016 was influenced by the recognition of the above mentioned gain on bargain purchase, which is not considered for tax purposes, in profit or loss. The tax rate based on the normalised income statement was 33,4%.
Profit for the year totalled 688,0 million Euro, compared to 162,0 million Euro in 2015; the normalised amount was 89,8 million Euro.
The corresponding figure for the fourth quarter was 621,7 million Euro (13,2 million Euro in the prioryear period).
With 40 thousand euro in profit attributable to non-controlling interests, the profit for the year attributable to the Parent Company totalled 687,9 million Euro.
| YEAR 2016 | YEAR 2015 | ||||
|---|---|---|---|---|---|
| (in thousands of Euro) | EQUITY: | OF WHICH PROFIT FOR THE YEAR |
EQUITY: | OF WHICH PROFIT FOR THE YEAR |
|
| Parent company balance | 596.975 | 71.722 | 567.509 | 160.743 | |
| Difference compared to the carrying amounts of the companies consolidated line by line |
621.808 | 616.223 | 5.958 | 1.223 | |
| - IFIS Finance Sp. Zo.o. | 6.645 | 1.772 | 5.958 | 1.223 | |
| - Interbanca S.p.a. | 615.163 | 614.451 | n.a. | n.a. | |
| Group consolidated balance | 1.218.783 | 687.945 | 573.467 | 161.966 |
Taking into account the business carried out and the results achieved, the Group's financial position is proportionate to its needs. Indeed, the Group's financial policy is aimed at favouring funding stability and diversification rather than the immediate operating needs. The main risks and uncertainties deriving from the present conditions of financial markets do not represent a particular problem for the Group's financial balance and, in any case, they are not likely to threaten business continuity.
Reference should be made to section E of the Notes to the Consolidated Financial Statements for further information on the Banca IFIS Group's risks.
As from 29 November 2004, Banca IFIS S.p.A.'s ordinary shares have been listed on the STAR segment of Borsa Italiana (the Italian stock exchange). The transfer to STAR occurred a year after the listing on the Mercato Telematico Azionario (MTA, an electronic stockmarket) of Borsa Italiana S.p.A.. Previously, as from 1990, the shares had been listed on the Mercato Ristretto (MR, a restricted market) of Borsa Italiana. The following table shows the share prices at the end of the year. As from 18 June 2012, Banca IFIS joined the Ftse Italia Mid Cap index.
The following table shows the ratio of the stock market value at period-end to consolidated equity with respect to the shares outstanding.
| Price/book value | 31.12.2016 | 31.12.2015 | 31.12.2014 | 31.12.2013 | 31.12.2012 |
|---|---|---|---|---|---|
| Share price at period-end | 26,00 | 28,83 | 13,69 | 12,95 | 5,53 |
| Consolidated Equity per share |
22,81 | 10,81 | 8,27 | 7,21 | 5,77 |
| Price/book value | 1,14 | 2,67 | 1,65 | 1,80 | 0,96 |
| Outstanding shares | 31.12.2016 | 31.12.2015 | 31.12.2014 | 31.12.2013 | 31.12.2012 |
|---|---|---|---|---|---|
| Number of shares outstanding at pe riod end (in thousands)(1) |
53.431 | 53.072 | 52.924 | 52.728 | 53.551 |
(1) Outstanding shares are net of treasury shares held in the portfolio.
Here below is the ratio of the consolidated profit for the year to the weighted average of the ordinary shares outstanding at year-end, net of treasury shares in portfolio, as well as the ratio of the year-end price to consolidated earnings per share.
| Earnings per share (EPS) | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Consolidated profit for the period (in thousands of Euro) | 687.945 | 161.966 |
| Consolidated earnings per share | 12,94 | 3,05 |
| Earnings per share and diluted earnings per share | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Consolidated profit for the period (in thousands of Euro) | 687.945 | 161.966 |
| Average number of outstanding shares | 53.153.178 | 53.034.493 |
| Average number of potentially dilutive shares | 9.635 | 5.787 |
| Average number of diluted shares | 53.143.543 | 53.028.706 |
| Consolidated earnings per share for the period (Units of Euro) | 12,94 | 3,05 |
| Consolidated diluted earnings per share for the period (Units of Euro) |
12,95 | 3,05 |
For 2016, the Board of Directors proposed to the Shareholders' Meeting to distribute a dividend of 0,82 Euro per share.
| Payout ratio (in thousands of Euro) |
2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| Consolidated profit for the year | 687.945 | 161.966 | 95.876 | 84.841 | 78.228 |
| Parent company dividends | 43.813 | 40.334 | 34.930 | 30.055 | 19.813 |
| Payout ratio | 6,4% | 24,9% | 36,4% | 35,4% | 25,4% |
The 2016 payout ratio was influenced by the gain on bargain purchase from the acquisition of the former GE Capital Interbanca Group. Normalizing net profit for the year from all effects attributable to the acquisition, the 2016 payout ratio would stand at 48,8%.
The share capital of the Parent Company at 31 December 2016 amounted to 53.811.095 Euro and is broken down into 53.811.095 shares with a par value of 1 Euro each.
The following table shows Banca IFIS's shareholders that, either directly or indirectly, own equity instruments with voting rights representing over 2% of Banca IFIS's share capital:
Banca IFIS has adopted the Corporate Governance Code for listed companies.
A Control and Risks Committee, an Appointments Committee, and a Remuneration Committee have been set up within the Bank's Board of Directors, which has also appointed a Supervisory Board with independent powers of action and control as per Italian Legislative Decree 231/2001.
Banca IFIS S.p.A. has been adopting for some time now a specific Code of Conduct as regards internal dealing. The aim of this Code of Conduct is to make internal regulations and procedures compliant with disclosure requirements concerning any significant transactions carried out by relevant subjects, or parties closely related to them, on financial instruments issued by the company or other related instruments, hence ensuring the transparency and consistency of information disclosed to the market.
This Code, in addition to identifying the relevant subjects—and defining their conduct and disclosure requirements—and the person responsible for receiving, managing and disseminating information, also forbids said transactions in the 30 days prior to Board of Directors' Meetings convened to approve financial statements (blackout periods).
This Code of Conduct for internal dealing is available on the Company's website, www.bancaifis.com, under the 'Investor Relations' section.
In compliance with article 115-bis of Italian Legislative Decree no. 58/1998, Banca IFIS has created a list of individuals who, in performing their professional and work duties or in carrying out their activity, have access to privileged information (the list of insiders). Banca IFIS constantly updates this list.
In addition, the Bank has laid down regulations for the internal management and external dissemination of documents and corporate information.
Banca IFIS transparently and timely discloses information to the market, constantly publishing information on significant events through press releases. Please refer to the "Investor Relations\Press Releases" section on the website www.bancaifis.it for complete details.
Here below is a summary of the most significant events.
On 30 November 2016, after obtaining the authorisations of the competent Supervisory Authorities on 29 November 2016, Banca IFIS acquired 99,99% of the former GE Capital Interbanca S.p.A.. The acquisition was conducted by entering into a Share Purchase Agreement (SPA) on 28 July 2016 with GE Capital International Holdings Limited. The 160 million Euro purchase price is subject to an adjustment mechanism to be calculated based on the financial position at the effective date. Under the agreement, GE Capital Interbanca and its subsidiaries fully repaid the amount due to the holding company, which amounted to approximately 2,1 billion Euro.
No significant events occurred between the end of the year and the approval of the draft financial statements by the Board of Directors.
The outlook for Europe and Italy is clouded by significant political and social uncertainty. A series of crucial elections hang in the balance—and combine with socio-economic tensions that the Italian and European governments are struggling to address. After years in which GDP has contracted or, more recently, grown at a modest pace, it is not possible to push back against the calls for changing Europe's institutional architecture without a credible and shared alternative to the status quo. Therefore, in Europe, and especially in Italy, it is hard to imagine how to raise economic growth, which would lead to new investments, boost confidence, and ultimately make public debts more sustainable.
The growth forecasts for the next few years cannot thus be expected to be completely accurate, and there is considerable uncertainty about the impact that the upcoming elections as well as the new international scenario and Britain's exit from the EU could have on economic indicators.
The robust GDP growth rates registered in other historical periods now appear to be a thing of the past, in Europe as well as maybe all industrialised countries. This is due to several factors, of which only some concern the economy. This situation has led some experts to argue that advanced economies may be facing a "secular stagnation", with extremely long periods of weak growth, low or no returns on risk-free investments, and low or zero inflation.
In the reference European markets, the cost of money remains at record lows—although it is expected to rise moderately in the not-so-distant future—because of two factors: the ECB's monetary policy, and still limited price increases (except for the rebound in oil prices). Core inflation remains largely unchanged because of the relatively modest use of the factors of production as well as other shifts—chief among them, the growing digitisation of the economy, which is driving down the cost of goods while disrupting traditional economic sectors. Monetary policy measures—not welcomed by everyone in Europe—should bring inflation near the central bank's target rates, even though a core inflation of just below 2% (excluding oil prices) remains a distant prospect in Europe.
It does not appear possible to steadily and sustainably grow our way out of the last few years of economic crisis without restarting the flow of credit to the real economy—especially in Italy.
Against this backdrop, the Banca IFIS Group's ability to provide support to small- and medium-sized businesses, also thanks to strengthening capital adequacy ratios and increasing liquidity, continues representing a competitive advantage, enabling it to acquire new customers—also with the new scope following the acquisition of the former Interbanca Group. The market is still characterised by the limited and selective supply of credit, and the demand for appropriate solutions—especially for companies that are small in size and have less measurable or low credit standing.
In 2017, the Banca IFIS Group will complete its restructuring following the acquisition of the former Interbanca Group, which was finalised on 30 November 2016. IFIS Factoring S.r.l. will be merged into Banca IFIS (after transferring the relevant shares from Interbanca S.p.A. and IFIS Leasing S.r.l. To the Parent Company) by the third quarter of 2017, and the merger of Interbanca S.p.A. will be completed before the end of the year. Then, consistently with the intention to streamline the Group's organisational structure, IFIS Leasing S.r.l. is expected to be merged into the Parent Company during 2018.
In commercial terms, the former Interbanca Group's operations have been organised by product line and will be developed as follows. Concerning finance and operating leases, which have strong synergies with Banca IFIS's traditional operations, special emphasis will be placed on returning to volumes consistent with the potential of IFIS Leasing. We expect to expand our presence across all business areas—especially in the automotive and equipment segments, and with the exception of real estate and shipping. In this sense, the cross-selling of the leasing and trade finance distribution networks will be key: combined, these ensure the Group maintains a widespread presence throughout Italy. As for corporate finance, this is the segment of Interbanca S.p.A., which operates in the following sectors: medium-term financing to businesses; structured finance; management of the non-performing and runoff portfolio. It consists of three different business units, and, as far as trade receivables are concerned, special emphasis will be placed on developing smaller-sized customers, boosting profitability, and making credit risk determinable. There will be a renewed push in the structured finance business, returning Interbanca to its leadership position. The Group will be as pro-active as possible in collecting nonperforming loans, aware of contingent market needs and focusing on selling assets based on a rigorous
assessment of economic viability. We will be able to do so also because we are not subject to the prudential capital requirements that force most Italian banks to make otherwise unnecessary sacrifices.
Concerning the scope of the former Interbanca Group—which will be mostly merged into Banca IFIS by the end of this year, and will therefore not report its results separately—we expect a steady increase in profitability, which could allow to reach the break-even point right away after several years of structural losses.
The Bank has been overhauling, and is continuing to overhaul, its distribution network, increasing its headcount and reimagining it to better meet the needs of tomorrow. The merger with the former Interbanca Group strengthens our ability to engage with the market as well as leads to an immediate and significant increase in the number of corporate customers, which will be gradually targeted by crossselling initiatives. We expect to increase the number of corporate customers and loans during the year, and throughout 2017 we will see whether these measures can boost overall profitability based on market trends. At the macroeconomic level, the scenario for business lending sees on the one hand a large amount of liquidity available, which puts downward pressure on lending interest rates; on the other hand, several institutions are reluctant to increase their exposure to avoid repercussions in terms of regulatory capital absorption. However, margins are limited across the board, and especially on loans to customers with a higher credit standing. If the recovery drives up demand for credit, and the challenges facing some institutions constrain the supply, we can reasonably expect this situation to gradually reverse, at least in the medium term.
The Group will continue focusing on smaller entities: given the need to pay close attention during the lending process to mitigate risks by using factoring and leasing, the profitability of this segment currently appears less compromised. The Bank will continue expanding its presence in the international markets where it operates; in the pharmaceutical industry and pharmacy segments; and in the sector of receivables due from Italy's Public Administration.
Overall, margins on business lending are likely to remain stable and gradually improve in the near future; in any case, the Bank will continue focusing on companies with less resources. This approach, which we introduced in 2016, will increase the number of smaller-sized customers—and could compensate for the pressure on margins.
Banca IFIS will play an increasingly important role in the non-performing loan sector (NPL Area), providing solutions in demand at lenders and financial institutions across Italy and abroad to manage non-performing loans in the face of the mentioned mounting regulatory pressure—which aims to remove excess non-performing loans from the balance sheets of the institutions with limited regulatory capital. We will continue monitoring and bidding for the portfolios of receivables due from households that originators are expected to place on the market. Banca IFIS is making progress in managing NPLs in terms of organisational and operating solutions, which allows to continue increasing collection rates. As in recent times, considering the abundant liquidity of the market; the Bank's ability to turn the quality of the portfolios into a strength in dealings with debtors; and the opportunity to scale up operating volumes, benefiting the bank and the debtors involved in its initiatives, Banca IFIS will consider trading in the secondary market. Specifically, it may also continue selling already processed portfolios with the goal of freeing up resources, using them to further expand the business, or buy portfolios that other players already started processing. The Bank will manage and collect debts using new techniques, including legal actions involving properties and against debtors with lower amounts outstanding; in addition, it will specifically strengthen phone relationships with customers, as these involve lower operating costs and are considerably more effective. The Bank will continue looking at the secured micro real estate sector, which shares some similarities with what the Bank is already doing, as well as the retail business segment. We expect this segment, which is proving capable of generating steady returns, to make an additional significant contribution to overall profitability.
As for tax receivables, the Bank maintains its leadership in this segment, given the good medium-term profitability of these investments. Also in this segment, margins are under pressure because of competition, but the Bank enjoys significant competitive advantages because of the recognised quality of its work and its operational skills. Returns will remain decent in an environment of risk-free rates of return stuck at zero.
As for the profitability of the Governance and Services sector, funding retails costs remain stable in the face of the current and projected steady increase in assets under management. The Bank aims to further develop retail funding, as it considers it to be an excellent source of funding. The interest rates at or below zero in the funding market remain available to non-first-tier banks only if they have prime collateral. Alternatively, wholesale funding has and will have costs broadly similar to retail funding, but the latter's stability is more consistent with the profile of the Bank's loans. Nonetheless, the Group is finalising or conducting a number of transactions to monetise assets through securitisations that, based on the quality of the underlying assets, will be financed on the Eurosystem (leasing assets) or the wholesale market (factoring assets)—as well as implementing procedures such as ABACO (the Bank of Italy's collateral management system). As for the government bond portfolio, the bank is not planning any significant changes: as it continues to gradually shrink in size, the relevant trading has become immaterial. However, to seize the last opportunity to participate in the TLTRO programme (amount: 700 million Euro), the Group must ensure it has enough adequate collateral, which will consist mostly of eligible instruments generated by the Group and backed by its own assets.
As the Board of Directors approves the 2016 Financial Statements, the Group is also adopting the new 2017-2019 Strategic Plan. Over a three-year period, it seeks to grow the Bank's presence in the reference sectors by adopting a stand alone approach, leaving ample room for additional actions concerning regulatory capital, liquidity, and human and technological resources. The Bank will therefore consider opportunities for inorganic growth in similar or adjacent sectors—as well as specific measures concerning portfolios or classes of either non-performing or performing assets. These will be based on the relevant characteristics as well as the opportunities that will come up from time to time in a market in which players will likely seek to dispose of assets in order to boost regulatory capital.
In light of the above, the Group can reasonably expect to remain profitable also 2017, considering the circumstances that gave rise to—often non-recurring—profits during 2016.
On 21 January 2013, Banca IFIS's Board of Directors resolved, as per art. 3 of Consob Regulation no. 18079 of 20 January 2012, to adopt the opt-out option pursuant to art. 70, paragraph 8 and art. 71, paragraph 1-bis, of Consob's Regulation on Issuers, thus exercising the right to depart from the obligations to publish information documents required in connection with significant operations like mergers, spin-offs, capital increases by contribution in kind, acquisitions and sales.
Pursuant to article 123 bis, paragraph three, of Italian Legislative Decree no. 58 of 24 February 1998 (the Consolidated Law on Banking), a report, separate from this Directors' report, was prepared. It was approved by the Board of Directors and published together with the draft financial statements at 31 December 2016. Furthermore, this document is available on Banca IFIS's website, www.bancaifis.com, in the 'Corporate Governance' Section.
The Report on Corporate Governance and Shareholding Structure has been drawn up according to the format provided by Borsa Italiana.
Together with this Report, the "Report on Remuneration" prepared pursuant to art. 123 ter of the Consolidated Law on Finance, was also made available.
In compliance with article 34, paragraph 1, letter g) of Italian Legislative Decree no. 196 of 30 June 2003 (the Personal Data Protection Code), the group periodically updates its 'Security Policy Document' setting out the measures taken to guarantee the protection of processed personal data.
Pursuant to arts. 2497 to 2497 sexies of the Italian Civil Code, it should be noted that the Parent Company La Scogliera S.p.A. does not carry out any management and coordination activities with respect to Banca IFIS, notwithstanding art. 2497 sexies of the Italian Civil Code, since the management and coordination of investee financial companies and banks is expressly excluded from La Scogliera's corporate purpose.
Banca IFIS, together with the parent company, La Scogliera S.p.A., opted for the application of group taxation (tax consolidation) in accordance with arts. 117 et seq. of Italian Presidential Decree 917/86. Transactions between these companies were regulated by means of a private written agreement between the parties, signed in the month of April 2016. This agreement will lapse after three years. Banca IFIS has an address for the service of notices of documents and proceedings relating to the tax periods for which this option is exercised at the office of La Scogliera S.p.A., the consolidating company. Under this tax regime, Banca IFIS's taxable income is transferred to La Scogliera S.p.A., which is re-
sponsible for calculating the overall group income. As a result, at 31 December 2016 Banca IFIS recognised net receivables due from the parent company amounting to 43,9 million Euro.
In 2016, the subsidiaries acquired from the former GE Capital Interbanca Group continued participating in the existing National Tax Consolidation, whose scope include Interbanca S.p.A. as the consolidating company and IFIS Leasing S.p.A., IFIS Factoring S.r.l., and IFIS Rental Services S.r.l. as consolidated companies.
Pursuant to the specific consolidation agreements between the parties under said regime, the individual companies are not refunded for any tax losses contributed to the Tax Consolidation; in addition, the taxes on any taxable profit of the individual entities that are part of the National Tax Group are paid only if, and to the extent that, the Consolidating Company actually pays them to Italian Tax Authorities based on the results of the Group's National Tax Consolidation.
At 31 December 2015, the bank held 739.446 treasury shares recognised at a market value of 5,8 million Euro and a par value of 739.446 Euro.
During 2016 Banca IFIS made the following transactions on treasury shares:
The remaining balance at the end of the year was 380.151 treasury shares with a market value of 3,2 million Euro and a par value of 380.151 Euro.
In compliance with the provisions of Consob resolution 17221 of 12 March 2010 and subsequently amended by means of Resolution 17389 dated 23 June 2010, as well as the prudential Supervisory provisions for banks in Circular no. 263 of 27 December 2006, Title V, Chapter V (12 December 2011 update) on "Risk activities and conflicts of interest towards related parties" issued by the Bank of Italy, any transactions with related parties and relevant parties are authorised pursuant to the procedure approved by the Board of Directors, which was most recently updated on 10 November 2016.
This document is publicly available on Banca IFIS's website, www.bancaifis.it, in the 'Corporate Governance' Section.
During 2016, no significant transactions with related parties were undertaken.
For information on individual related party transactions, please refer to part H of the Notes to the Consolidated Financial Statements.
During 2016, the Banca IFIS Group did not carry out atypical or unusual transactions as defined by Consob Communication no. 6064293 of 28 July 2006.
Due to its business, the Group did not implement any research and development programmes during the year.
Venice - Mestre, 16 March 2017
For the Board of Directors
The Chairman Sebastien Egon Fürstenberg The C.E.O. Giovanni Bossi
| Assets (in thousands of Euro) |
31.12.2016 | 31.12.2015 | |
|---|---|---|---|
| 10. | Cash and cash equivalents | 34 | 34 |
| 20. | Financial assets held for trading | 47.393 | 259 |
| 40. | Available for sale financial assets | 374.229 | 3.221.533 |
| 60. | Due from banks | 1.393.358 | 95.352 |
| 70. | Loans to customers | 5.928.212 | 3.437.136 |
| 120. | Property, plant and equipment | 110.348 | 52.163 |
| 130. | Intangible assets | 14.981 | 7.170 |
| of which: | |||
| - goodwill | 799 | 820 | |
| 140. | Tax assets | 581.016 | 61.737 |
| a) current |
87.836 | 22.315 | |
| b) deferred |
493.180 | 39.422 | |
| of which as per Italian law 214/2011 | 191.417 | - | |
| 160. | Other assets | 249.574 | 82.336 |
| Total assets | 8.699.145 | 6.957.720 |
| Liabilities and equity (in thousands of Euro) |
31.12.2016 | 31.12.2015 | |
|---|---|---|---|
| 10. | Due to banks | 503.964 | 662.985 |
| 20. | Due to customers | 5.045.136 | 5.487.476 |
| 30. | Debt securities issued | 1.488.556 | |
| 40. | Financial liabilities held for trading | 48.478 | 21 |
| 80. | Tax liabilities | 24.925 | 25.549 |
| a) current |
491 | 4.153 | |
| b) deferred |
24.434 | 21.396 | |
| 100. | Other liabilities | 337.325 | 204.598 |
| 110. | Post-employment benefits | 7.660 | 1.453 |
| 120. | Provisions for risks and charges | 24.318 | 2.171 |
| b) other reserves |
24.318 | 2.171 | |
| 140. | Valuation reserves | (5.445) | 5.739 |
| 170. | Reserves | 383.835 | 298.856 |
| 180. | Share premiums | 101.776 | 58.900 |
| 190. | Share capital | 53.811 | 53.811 |
| 200. | Treasury shares (-) | (3.187) | (5.805) |
| 210. | Non-controlling interests (+ / -) | 48 | - |
| 220. | Profit (loss) for the period (+/-) | 687.945 | 161.966 |
| Total liabilities and equity | 8.699.145 | 6.957.720 |
| Items (in thousands of Euro) |
31.12.2016 | 31.12.2015 | |
|---|---|---|---|
| 10. | Interest receivable and similar income | 325.438 | 250.210 |
| 20. | Interest due and similar expenses | (57.255) | (41.584) |
| 30. | Net interest income | 268.183 | 208.626 |
| 40. | Commission income | 59.406 | 63.174 |
| 50. | Commission expense | (18.295) | (4.391) |
| 60. | Net commission income | 41.111 | 58.783 |
| 80. | Net result from trading | (702) | (78) |
| 100. | Gain (loss) on sale or buyback of: | 50.007 | 140.627 |
| a) loans and receivables | 44.529 | 14.948 | |
| b) available for sale financial assets | 5.478 | 125.679 | |
| 120. | Net banking income | 358.599 | 407.958 |
| 130. | Net impairment losses/reversal on | (59.233) | (34.250) |
| a) loans and receivables | (54.882) | (25.273) | |
| b) available for sale financial assets | (4.356) | (8.977) | |
| d) other financial transactions | 5 | - | |
| 140. | Net profit (loss) from financial activities | 299.366 | 373.708 |
| 180. | Administrative expenses: | (192.154) | (127.170) |
| a) personnel expenses | (65.878) | (48.342) | |
| b) other administrative expenses | (126.276) | (78.828) | |
| 190. | Net allocations to provisions for risks and charges | (1.849) | (229) |
| 200. | Net impairment losses/Reversal on property, plant and equipment | (2.485) | (1.650) |
| 210. | Net impairment losses/Reversal on intangible assets | (3.570) | (2.096) |
| 220. | Other operating income/expenses | 621.218 | 3.026 |
| 230. | Operating costs | 421.160 | (128.119) |
| 280. | Pre-tax profit (loss) for the period from continuing operations | 720.526 | 245.589 |
| 290. | Income taxes for the year relating to current operations | (32.541) | (83.623) |
| 300. | Pre-tax profit (loss) from continuing operations | 687.985 | 161.966 |
| 320. | Profit (loss) for the period | 687.985 | 161.966 |
| 330. | Profit (loss) for the year attributable to non-controlling interests | 40 | - |
| 340. | Profit (loss) for the year attributable to the Parent Company | 687.945 | 161.966 |
| Items (in thousands of Euro) |
31.12.2016 | 31.12.2015 | |
|---|---|---|---|
| 10. | Profit (loss) for the period | 687.985 | 161.966 |
| Other comprehensive income, net of taxes, without reversal to income statement |
44 | 95 | |
| 20. | Property, plant and equipment | - | - |
| 30. | Intangible assets | - | - |
| 40. | Defined benefit plans | 44 | 95 |
| 50. | Non-current assets under disposal | - | - |
| 60. | Share of valuation reserves of equity accounted investments | - | - |
| Other comprehensive income, net of taxes, with reversal to income statement |
(11.228) | 5.753 | |
| 70. | Foreign investment hedges | - | - |
| 80. | Exchange differences | (1.085) | 45 |
| 90. | Cash flow hedges | - | - |
| 100. | Available for sale financial assets | (10.143) | 5.708 |
| 110. | Non-current assets under disposal | - | - |
| 120. | Share of valuation reserves of equity accounted investments | - | - |
| 130. | Total other comprehensive income, net of taxes | (11.184) | 5.848 |
| 140. | Total comprehensive income (item 10+130) | 676.801 | 167.814 |
| 150. | Total consolidated comprehensive income attributable to non-controlling | (40) | - |
| 160. | interests Total consolidated comprehensive income attributable to the Par ent Company |
676.761 | 167.814 |
| A l loc t ion a fro m p rev |
f p f i t o ro iou s y ear |
C | ng es oc |
d du rre r |
he t ea y |
ha ing cu r |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Eq i ty tra t ion u nsa c s |
|||||||||||||||||
| Balance at 31/12/2015 | Change in opening balances | Balance at 01/01/2016 | Reserves | Dividends and other allocations |
Changes in reserves | Issue of new shares | Buyback of treasury shares |
Extraordinary distribu tion of dividends |
Changes in equity in struments |
Derivatives on treasury shares |
Stock Options | Changes in equity in vestments |
Comprehensive income for the year 2016 |
Equity attributable to the Group at 31/12/2016 |
Equity attributable to non-control ling interests at 31/12/2016 |
||
| S ha i l: ta re ca p |
|||||||||||||||||
| ) d ina ha a or ry s res |
5 3. 8 1 1 |
- | 5 3. 8 1 1 |
- | - | - | - | - | - | - | - | - | - | - | 5 3. 8 1 1 |
- | |
| ) b t he ha o r s res |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |
| S ha ium re p rem s |
5 8. 9 0 0 |
- | 5 8. 9 0 0 |
- | - | 3 6. 8 1 3 |
6. 0 6 3 |
- | - | - | - | - | - | - | 1 0 1. 7 7 6 |
||
| Re se rve s: |
- | ||||||||||||||||
| ) ta ine d e ing a re arn s |
2 5 6. 7 7 8 |
- | 2 5 6. 7 7 8 |
1 2 1. 6 2 4 |
- | - | - | - | - | - | - | - | - | - | 3 7 8. 4 0 2 |
- | |
| b ) t he o r |
4 2. 0 7 8 |
- | 4 2. 0 7 8 |
- | - | ( 3 6. 6 4 5 ) |
- | - | - | - | - | - | - | - | 5. 4 3 3 |
8 | |
| Va lua t ion re se rve s: |
5. 7 3 9 |
- | 5. 7 3 9 |
- | - | - | - | - | - | - | - | - | - | ( 1 1. 1 8 4 ) |
( 5. 4 4 5 ) |
||
| Eq i ins ty tru ts u me n |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |
| Tre ha as ury s res |
( 8 0 ) 5. 5 |
- | ( 8 0 ) 5. 5 |
- | - | - | 2. 6 1 8 |
- | - | - | - | - | - | - | ( 3. 1 8 ) 7 |
- | |
| Pro f i ( los ) for he io d t t s p er |
1 6 1. 9 6 6 |
- | 1 6 1. 9 6 6 |
( 1 2 1. 6 2 4 ) |
( 4 0. 3 4 2 ) |
- | - | - | - | - | - | - | - | 6 8 9 4 7. 5 |
6 8 9 4 7. 5 |
4 0 |
|
| Eq i ty u |
3. 4 6 5 7 7 |
- | 3. 4 6 5 7 7 |
- | ( 4 0. 3 4 2 ) |
1 6 8 |
8. 6 8 1 |
- | - | - | - | - | - | 6 6. 6 1 7 7 |
1. 2 1 8. 3 7 5 |
- | |
| Eq i ty t tr i bu ta b le to u a no n- l l ing in tro ter ts co n es |
- | - | - | - | - | - | - | - | - | - | - | 8 | 4 0 |
- | 4 8 |
| A l loc t ion a fro m p rev |
f p f i t o ro iou s y ear |
C ha d du ing t he ng es oc cu rre r y ea r |
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Eq i ty tra t ion u nsa c s |
||||||||||||||||
| Balance at 31/12/2014 | Change in opening balances | Balance at 1/1/2015 | Reserves | Dividends and other allocations |
Changes in reserves | Issue of new shares | Buyback of treasury shares |
Extraordinary distribu tion of dividends |
Changes in equity in struments |
Derivatives on treasury shares |
Stock Options | Changes in equity in vestments |
Comprehensive income for the year 2015 |
Equity attributable to the Group at 31/12/2015 |
Equity attributable to non-control ling interests at 31/12/2015 |
|
| S ha i ta l: re ca p |
||||||||||||||||
| ) d ina ha a or ry s res |
5 3. 8 1 1 |
- | 5 3. 8 1 1 |
- | - | - | - | - | - | - | - | - | - | - | 5 3. 8 1 1 |
- |
| b ) t he ha o r s res |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| S ha ium re p rem s |
5 7. 1 1 3 |
- | 5 7. 1 1 3 |
- | - | - | 1. 7 8 7 |
- | - | - | - | - | - | - | 5 8. 9 0 0 |
- |
| Re se rve s: |
||||||||||||||||
| ) ine d e ing ta a re arn s |
1 9 5. 9 2 1 |
- | 1 9 5. 9 2 1 |
6 0. 8 5 7 |
- | - | - | - | - | - | - | - | - | - | 2 5 6. 7 7 8 |
- |
| b ) he t o r |
4 1. 9 5 3 |
- | 4 1. 9 5 3 |
- | - | 1 2 5 |
- | - | - | - | - | - | - | - | 4 2. 0 7 8 |
- |
| Va lua ion t re se rve s: |
( 1 0 9 ) |
- | ( 1 0 9 ) |
- | - | - | - | - | - | - | - | - | - | 5. 8 4 8 |
5. 7 3 9 |
- |
| Eq i ins ty tru ts me n u |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| Tre ha as ury s res |
( 6. 7 1 ) 5 |
- | ( 6. 7 1 ) 5 |
- | - | - | 9 1 0 |
- | - | - | - | - | - | - | ( 8 0 ) 5. 5 |
- |
| f ( ) for Pro i t los t he io d s p er |
9 8 6 5. 7 |
- | 9 8 6 5. 7 |
( 6 0. 8 ) 5 7 |
( 3 0 1 9 ) 5. |
- | - | - | - | - | - | - | - | 1 6 1. 9 6 6 |
1 6 1. 9 6 6 |
- |
| Eq i ty u |
4 3 7. 8 5 0 |
- | 4 3 7. 8 5 0 |
- | ( ) 3 5. 0 1 9 |
1 2 5 |
2. 6 9 7 |
- | - | - | - | - | - | 1 6 7. 8 1 4 |
5 7 3. 4 6 7 |
- |
| Eq i ty t tr i bu ta b le to u a no n- tro l l ing in ter ts co n es |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| Indirect method (in thousands of Euro) | 31.12.2016 | 31.12.2015 |
|---|---|---|
| A. OPERATING ACTIVITIES | ||
| 1. Operations | 197.181 | 408.513 |
| - profit(loss) for the year (+/-) |
687.945 | 161.966 |
| - profit/loss on financial assets held for trading and on financial assets/liabilities |
||
| at fair value (-/+) | 818 | - |
| - profit/loss on hedging activities |
- | - |
| - net impairment losses/reversal on loans (+/-) |
59.477 | 34.250 |
| - net impairment losses/reversal on property, plant, and equipment and intangible assets (+/-) |
6.055 | 3.746 |
| - net allocations to provisions for risks and charges and other expenses/income (+/-) |
22.232 | 248 |
| - unpaid taxes (+) |
32.541 | 83.623 |
| - other adjustments (+/-) |
(611.887) | 124.680 |
| 2. Cash flows generated/absorbed by financial assets | 1.570.097 | 1.204.350 |
| - Financial assets held for trading |
2.330 | (259) |
| - financial assets at fair value |
- | - |
| - available for sale financial assets |
2.888.691 | 1.724.190 |
| - due from banks on demand |
(37.401) | 30.656 |
| - other due from banks |
(1.019.712) | 148.835 |
| - loans to customers |
(163.170) | (648.079) |
| - other assets |
(100.641) | (50.993) |
| 3 Cash flows generated/absorbed by financial liabilities | (1.592.051) | (1.574.779) |
| - due to banks on demand |
60.945 | 25.146 |
| - other due to banks |
(2.059.231) | (1.621.128) |
| - due to customers |
(978.006) | 3.957 |
| - debt securities issued |
1.404.408 | - |
| - financial liabilities held for trading |
(2.459) | 21 |
| - financial liabilities at fair value |
- | - |
| - other liabilities |
(17.708) | 17.225 |
| Net cash flows generated/absorbed by operating activities A (+/-) B. INVESTING ACTIVITIES |
175.227 | 38.084 |
| 1. Cash flows generated by: | 158 | 93 |
| - sale of equity investments |
- | - |
| - dividends collected on equity investments |
- | - |
| - sale of held to maturity financial assets |
- | |
| - sale of property, plant and equipment |
158 | 93 |
| - sale of intangible assets |
- | - |
| - sale of business branches |
- | - |
| 2. Cash flows absorbed by: | (143.892) | (5.970) |
| - purchase of investments |
(119.202) | - |
| - purchase of held to maturity financial assets |
- | - |
| - purchase of property, plant and equipment |
(14.421) | (3.261) |
| - purchase of intangible assets |
(10.269) | (2.709) |
| - purchase of business branches |
- | - |
| Net cash flows generated/absorbed by investment activities B (+/-) | (143.734) | (5.877) |
| C. FINANCING ACTIVITIES | ||
| - issue/buyback of treasury shares |
8.681 | 2.697 |
| - issue/buyback of equity instruments |
167 | 125 |
| - distribution of dividends and other |
(40.341) | (35.019) |
| Net cash flows generated/absorbed by financing activities C (+/-) | (31.493) | (32.197) |
| NET CASH FLOWS GENERATED /ABSORBED DURING THE YEAR D=A+/-B+/-C | - | 10 |
| RECONCILIATION | ||
| OPENING CASH AND CASH EQUIVALENTS E | 34 | 24 |
| NET CASH FLOWS GENERATED /ABSORBED DURING THE YEAR D | - | 10 |
| CASH AND CASH EQUIVALENTS: EFFECTS OF CHANGES IN FOREIGN EXCHANGE | - | - |
| CLOSING CASH AND CASH EQUIVALENTS G=E+/-D+/-F | 34 | 34 |
The Notes to the Consolidated Financial Statements are divided into the following parts:
The Consolidated Financial Statements at 31 December 2016 have been drawn up in accordance with the IASs/IFRSs in force at said date issued by the International Accounting Standards Board (IASB), together with the relevant interpretations (IFRICs and SICs). These standards were endorsed by the European Commission in accordance with the provisions in article 6 of European Union Regulation no. 1606/2002. This regulation was implemented in Italy with Legislative Decree no. 38 of 28 February 2005.
Concerning the interpretation and implementation of international accounting standards, the Banca IFIS Group referred to the "Framework for the Preparation and Presentation and Financial Statements", even though it has not been endorsed by the European Commission, as well as the Implementation Guidance, Basis for Conclusions, and any other documents prepared by the IASB or the IFRIC complementing the accounting standards issued.
The accounting standards adopted in preparing these financial statements are those in force at 31 December 2016 (including SIC and IFRIC interpretations).
The Group also considered the communications from Supervisory Authorities (Bank of Italy, Consob, and ESMA), which provide recommendations on the disclosures to include in the financial statements concerning the most material aspects or the accounting treatment of specific transactions.
These Consolidated Financial Statements are subject to certification by the delegated corporate bodies and the Corporate Accounting Reporting Officer, as per article 154 bis paragraph 5 of Italian Legislative Decree no. 58 of 24 February 1998.
The Consolidated Financial Statements are audited by EY S.p.A..
The consolidated financial statements consist of:
In addition, they contain the Directors' Report.
Finally, as per article 123-bis of Italian Legislative Decree no. 58 of 24 February 1998 (Consolidated Law on Finance), the Report on Corporate Governance and Shareholding Structure is available in the "Corporate Governance" Section of the Bank's internet website www.bancaifis.it.
The Consolidated Financial Statements have been drawn up according to the general principles of IAS 1, referring also to IASB's 'Framework for the preparation and presentation of financial statements', with particular attention to the fundamental principles of substance over legal form, the concepts of relevance and materiality of information, and the accruals and going concern accounting concepts.
For the preparation of these Consolidated Financial Statements, reference was made to the format set out by Bank of Italy's Circular no. 262 of 22 December 2005, 4th update of 15 December 2015.
The money of account is the Euro and, if not indicated otherwise, amounts are expressed in thousands of Euro. The tables in the notes may include rounded amounts; any inconsistencies and/or discrepancies in the data presented in the different tables are due to these rounding differences.
The notes do not include the items and tables required by Bank of Italy's Regulation no. 262/2005 where these items are not applicable to the Banca IFIS Group.
Assets and liabilities, as well as costs and revenues, have been offset only if required or permitted by an accounting standard or the relevant interpretation.
We have used the same classification for the items in the financial statements as in the previous financial year.
The Bank of Italy, Consob and Isvap, with document no. 2 issued on 6 February 2009 "Disclosure in financial reports on the going concern assumption, financial risks, asset impairment tests and uncertainties in the use of estimations", as well as the subsequent document no. 4 of 4 March 2010, require Directors to assess with particular accuracy the existence of the company as a going concern, as per IAS 1.
In this regard, having examined the risks and uncertainties associated with the present macro-economic context, and considering the financial and economic plans drawn up by the parent company, the Banca IFIS Group can indeed be considered a going concern, in that it can be reasonably expected to continue to operate in the foreseeable future. Therefore, the 2016 Consolidated Financial Statements have been prepared in accordance with this fact.
Uncertainties associated with credit and liquidity risks are considered not significant enough to raise doubts over the company's ability to continue as a going concern, thanks also to the good profitability levels that the Group has consistently achieved, to the quality of its loans, and to its current access to financial resources.
At 31 December 2016, the Group was composed of the parent company, Banca IFIS S.p.A., the whollyowned subsidiary, IFIS Finance Sp. Z o. o., the 99,99%-owned subsidiary Interbanca S.p.A. and its subsidiaries IFIS Leasing S.p.A., IFIS Factoring S.r.l., and IFIS Rental Services S.r.l., in which Interbanca owns directly and indirectly all voting rights. All the companies are consolidated using the lineby-line method.
As detailed in Part G of these Notes, Banca IFIS acquired control over the former Interbanca Group on 30 November 2016 after obtaining the authorisation of the competent Supervisory Authorities.
The consolidated financial statements include the financial statements of the parent company Banca IFIS S.p.A. and the mentioned subsidiaries.
The financial statements of the subsidiary IFIS Finance Sp. Z o.o. expressed in foreign currency are translated into Euro by applying the rate of exchange at the end of the period to assets and liabilities. As for the income statement, the items are translated using the average exchange rate, which is considered as a valid approximation of the spot exchange rate. Exchange differences arising from the application of different exchange rates for the statement of financial position and the income statement, as well as the exchange differences from the translation of the investee company's equity, are recognised under capital reserves.
Assets and liabilities, off-balance-sheet transactions, income and expenses, as well as the profits and losses arising from relations between the consolidated companies are all eliminated.
Starting with the financial statements for periods beginning after 1 July 2009, business combinations must be recognised by applying the principles established by IFRS 3; purchases of equity investments in which control is obtained and counting as "business combinations" must be recognised by applying the acquisition method, which requires:
As for the subsidiary IFIS Finance Sp. Z o.o., the consolidation process has brought about goodwill for 799 thousand Euro at the period-end exchange rate, recognised under item 130 'Intangible assets'.
As for the subsidiaries of the former Interbanca Group, the consolidated financial statements showed a gain on bargain purchase totalling 623,6 million Euro, which was recognised under Other operating income/expenses.
| Name of the company | Registered of | Head office | Type (1) | Investment | Voting rights | |
|---|---|---|---|---|---|---|
| fice | Held by | Share % | % (2) | |||
| IFIS Finance Sp. Z o.o. | Warsaw | Warsaw | 1 | Banca IFIS S.p.A. | 100% | 100% |
| Interbanca S.p.A. | Milan | Milan | 1 | Banca IFIS S.p.A. | 99,99% | 99,99% |
| IFIS Leasing S.p.A. | Mondovì - Prov ince of Cuneo |
Mondovì - Prov ince of Cuneo |
1 | Interbanca S.p.A. | 100% | 100% |
| IFIS Factoring S.r.l. (3) | Milan | Milan | 1 | Interbanca S.p.A. | 60% | 100% |
| IFIS Rental Services S.r.l. | Milan | Milan | 1 | Interbanca S.p.A. | 100% | 100% |
| IFIS ABCP Programme S.r.l. | Conegliano - Province of Tre viso |
Conegliano - Province of Tre viso |
4 | Other | 0% | 0% |
| Indigo Lease S.r.l. | Conegliano - Province of Tre viso |
Conegliano - Province of Tre viso |
4 | Other | 0% | 0% |
| Indigo Loan S.r.l. | Conegliano - Province of Tre viso |
Conegliano - Province of Tre viso |
4 | Other | 0% | 0% |
Key
(1) Type of relationship:
1 = majority of voting rights in the Annual Shareholders' Meeting
2 = dominant influence in the Annual Shareholders' Meeting
3 = agreements with other shareholders
4 = other forms of control
5 = exclusive control as per article 26, paragraph 1, of Legislative Decree no. 87/92
6 = exclusive control as per article 26, paragraph 2, of Legislative Decree no. 87/92
(2) Voting rights in the Annual Shareholders' Meeting, distinguishing between effective and potential voting rights.
(3) The Group owns the remaining 40% through IFIS Leasing S.p.A. – company of the Banking Group 100%-owned directly by Interbanca S.p.A.
In order to determine the scope of consolidation, Banca IFIS assessed whether it meets the requirements of IFRS 10 for controlling investees or other entities with which it has any sort of contractual arrangements.
An entity controls another entity when the former has all the following:
The assessment carried out led the Bank to include the subsidiaries listed in the previous paragraph, as well as the SPVs (Special Purpose Vehicles) set up for securitisation purposes, in the scope of consolidation at 31 December 2016. These SPVs are not legally part of the Banca IFIS Group.
In addition, there was an unconsolidated structured entity (see part E, section D in these Notes).
No significant events occurred between year-end and the preparation of these consolidated financial statements other than those already included herein.
For information on such events, please refer to the Directors' report.
Using accounting standards often requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. In making the assumptions underlying the estimates, management considers all available information at the reporting date as well as any other factor deemed reasonable for this purpose.
Specifically, it made estimates on the carrying amounts of some items recognised in the consolidated financial statements at 31 December 2016, as per the relevant accounting standards. These estimates are largely based on the expected future recoverability of the amounts recognised and were made on a going concern basis. Such estimates support the carrying amounts reported at 31 December 2016.
Estimates are reviewed at least annually when preparing the financial statements.
The risk of uncertainty in the estimates, considering the materiality of the reported amounts of assets and liabilities and the judgement required of management, substantially concerns the measurement of:
For more details, see Information on risks and risk management policies as well as Fair value disclosure.
As for the receivables of the Pharma BU, during 2016 the Bank implemented a new model to estimate the cash flows from receivables due from Italy's National Health Service acquired and managed by the Pharma BU. Specifically, the Bank estimates the interest on arrears considered recoverable from the acquisition date based on historical evidence and differentiating according to the type of collection actions taken by the Pharma BU (settlement or judicial action). Overall, the assumptions underlying the estimate of their recoverability were conservative. Banca IFIS estimates cash flows in accordance with the provisions of the joint Bank of Italy/Consob/Ivass document no. 7 of 9 November 2016 "Accounting of interest on arrears as per Italian Legislative Decree 231/2002 on performing loans purchased outright". The change in estimated cash flows, discounted using the original IRR of the positions, resulted in a 15,8 million Euro change in amortised cost recognised in profit or loss under interest income.
Concerning specifically the measurement of NPL Area receivables, the risk management, when assessing the Bank's capital adequacy, regularly assesses the so-called model risk by carrying out specific analyses.
The consolidated financial statements at 31 December 2016 have been drawn up in accordance with the IASs/IFRSs in force at 31 December 2016. See the paragraph Statement of compliance with international accounting standards.
The Group has adopted for the first time some accounting standards and amendments effective for annual periods beginning on or after 1 January 2016. Here below are the new accounting standards and the amendments to existing accounting standards endorsed by the EU, which have not materially affected the Group's consolidated financial statements.
The Group has not adopted early any other standard, interpretation or amendment issued but not endorsed by the European Union.
Concerning the new IFRS 9, which will become effective on 1 January 2018, during 2016 the Group conducted an assessment together with a leading audit firm to define the road map for the adoption of the new accounting standard. This assessment did not identify any significant impacts for the Group.
Pursuant to art. 154-ter of Italian Legislative Decree no. 58/98 (Consolidated Law on Finance), the Parent must approve the separate financial statements and publish the Consolidated Annual Financial Report, including the draft separate financial statements, the directors' report, and the declaration as per article 154-bis, paragraph 5, within 120 days of the end of the financial year. The Board of Directors approved the Parent's draft separate financial statements and the consolidated financial statements on 16 March 2017; the Parent's separate financial statements will be submitted to the Shareholders' Meeting to be held on 21 April 2017 on first call for approval.
There were no other changes requiring disclosure as per IAS 8, paragraphs 28, 29, 30, 31, 39, 40 and 49.
Financial assets held for trading include financial instruments held with the intention of generating profit from fluctuations in their prices in the short term.
This category includes debt and equity securities and the positive fair value of derivative contracts held for trading. Derivative contracts include those embedded in complex financial instruments that are accounted for separately if:
Financial assets are initially recognised at the date of settlement in the case of debt and equity securities, and at inception in the case of derivative contracts. At initial recognition, financial assets held for trading are measured at cost, that is the instrument's fair value, excluding the expenses and income directly attributable to the instrument, which are recognised in profit or loss. The implied derivative component in structured instruments that is not closely related to the host contract and meets the definition of a derivative instrument is separated from the host contract and measured at fair value, while the host contract is recognised using the relevant accounting policy.
Also subsequent to initial recognition, financial assets held for trading are measured at fair value.
The fair value of the financial instruments included in this portfolio is calculated based on quoted prices in active markets, prices provided by market participants, or internal valuation models generally used for pricing financial instruments that take into account all relevant risk factors and are based on observable market data.
Specifically, the instruments included in this item are unquoted derivative instruments measured using generally accepted valuation models based on market inputs. As for the counterparty risk associated with derivatives outstanding with Corporate counterparties, the performing portfolio is measured using PD and LGD inputs on which the collective assessment of receivables is based, while the non-performing portfolio is assessed individually.
Financial assets held for trading are derecognised exclusively when all relevant risks and rewards have been transferred. Should the company retain part of the relevant risks and rewards, the financial assets will continue to be recognised, even though legal ownership has been actually transferred to a third party.
Where it is not possible to ascertain the substantial transfer of the risks and rewards, financial assets are derecognised if the company no longer has control over them. Otherwise, the financial assets are recognised proportionally to the entity's continuing involvement in the asset, measured according to the exposure to changes in the transferred assets' value and cash flows.
Lastly, as for the transfer of collection rights, transferred financial assets are derecognised even if contractual rights to receive cash flows are maintained but an obligation to pay such flows to one or more companies is taken on.
These are financial assets not classified as loans and receivables, held-to-maturity investments, or financial assets held for trading. They can fall under available-for-sale financial investments, money market securities, other debt instruments and equity securities.
Available for sale financial assets are initially recognised at fair value, i.e. the cost of the operation including transaction costs directly attributable to the instrument, if any.
For interest-bearing instruments, interest is recognised at amortised cost, using the effective interest method.
Subsequent to their initial recognition, these investments are measured at their year-end fair value. The fair value is calculated based on the same criteria as those used for financial assets held for trading. Gains and losses resulting from changes in fair value are recognised under a dedicated equity reserve until the financial asset is transferred: then, accrued profits and losses are recognised in profit or loss. Changes in fair value recognised in the item "valuation reserve" are also included in the statement of comprehensive income under item 100 "Available for sale financial assets".
If there is objective evidence that the asset is permanently impaired, the accrued loss recognised directly to equity is transferred to profit or loss. The total amount of this loss is equal to the difference between the carrying amount (acquisition cost, net of any impairment losses previously recognised in the income statement) and the fair value.
As for debt instruments, any circumstances indicating that the borrower is experiencing financial difficulties that could undermine the collection of the principal or interests represent a permanent impairment loss.
As far as equity instruments are concerned, the existence of impairment losses is assessed on the basis of indicators such as fair value falling below cost and adverse changes in the environment in which the company operates, as well as the issuer's debt servicing difficulties. A significant or lasting fall in the fair value of an equity instrument below its cost is considered objective evidence of an impairment loss. The impairment loss is considered significant if the fair value falls by more than 20% below cost, and is considered lasting if it persists for more than 9 months.
If, at a later date, the fair value of a debt instrument increases and such an increase can be objectively related to an event occurring after the period in which the impairment loss was recognised in profit or loss, the impairment loss is reversed, recognising the corresponding amount in profit or loss.
As for equity securities, instead, if the grounds for impairment no longer exist, the impairment losses are later reversed through equity.
Available for sale financial assets are derecognised exclusively when all relevant risks and rewards have been transferred. Should the company retain part of the relevant risks and rewards, the financial assets will continue to be recognised, even though legal ownership has been actually transferred to a third party.
Where it is not possible to ascertain the substantial transfer of the risks and rewards, financial assets are derecognised if the company no longer has control over them. Otherwise, the financial assets are recognised proportionally to the entity's continuing involvement in the asset, measured according to the exposure to changes in the transferred assets' value and cash flows.
Lastly, as for the transfer of collection rights, transferred financial assets are derecognised even if contractual rights to receive cash flows are maintained but an obligation to pay such flows to one or more companies is taken on.
Receivables include loans to customers and banks with fixed or determinable payment dates and not traded on an active market.
Receivables due from customers largely consist of:
Distressed retail loans, due to their nature, are classified as either unlikely to pay or bad loans according to the criteria established in Circular 272/2008, which sets out the rules for reporting on supervisory, statistical, and financial matters as well as prudential capital ratios, and Circular 139/1991, relating to the Central Credit Register. In particular, those loans maintain the same classification as that assigned by the invoice seller, provided the latter is subject to the same law as Banca IFIS: otherwise, if the Bank has not ascertained the debtor's state of insolvency, those loans are classified as unlikely to pay.
Receivables are initially recognised at the date they are granted and/or acquired at fair value, or, in the case of a debt security, the date of settlement, based on the fair value of the financial instrument, which is equal to the amount granted or the subscription price, including transaction costs. Transaction costs are incremental costs that are directly attributable to the acquisition or granting of loans and determinable right from the beginning of the transaction, even if settled at a later date. Incremental costs are those costs that the company would not have incurred had it not acquired or granted the loan. Costs meeting these characteristics, but to be reimbursed by the debtor or falling under normal internal administrative costs, are excluded.
When the net amount granted does not correspond to the asset's fair value because the interest rate applied was lower than the market rate or the rate usually applied to loans with similar characteristics, loans and receivables are initially recognised at an amount equal to the discounting of future cash flows using a market rate. The difference compared to the amount granted or the subscription price is recognised directly in profit or loss.
Contango contracts and repurchase agreements are recognised as funding or lending transactions. Specifically, repurchase agreements are recognised as payables for the amount received, while reverse repurchase agreements are recognised as receivables for the amount paid.
After initial recognition, receivables are measured at amortised cost, which is equal to the initial amount minus/plus reimbursements of principal, impairment losses/reversals of impairment losses, and amortisation calculated using the effective interest method. The effective interest rate is calculated as the rate at which the present value of expected cash flows for the principal and interest is equal to the amount of the loan granted, including any directly attributable costs/revenues. This finance-based accounting method allows to spread the economic effect of costs/revenues over the expected residual life of the receivable.
The amortised cost method usually does not apply to short-term loans, as the effect of discounting would be immaterial. These are measured instead at their acquisition cost. A similar criterion applies to loans without a definite payment date or revocable loans. Furthermore, newly acquired distressed retail loans are measured at cost until the Bank has started taking action to collect the debt, as specified later on in the part concerning non-performing exposures in the NPL Area sector.
At the end of every reporting period, including interim periods, receivables are reviewed in order to identify those objectively at risk of impairment following events occurred after their initial recognition. In accordance with both the Bank of Italy's regulations and IASs, bad loans, unlikely to pay, and past due exposures fall into this category.
In the notes, impairment losses on loans are classified as individual impairment losses in the mentioned income statement item even under a lump-sum calculation method.
As for the non-performing exposures included in the trade receivables sector, they were measured according to the following criteria.
Bad loans are individually evaluated, and the total amount of the impairment loss on each loan is equal to the difference between the carrying amount at measurement (amortised cost) and the present value of expected future cash flows, calculated by applying the effective interest method at the moment in which the loan went bad. Expected cash flows are calculated taking into account expected recovery times based on historical elements and other significant characteristics, as well as the estimated realisable value of guarantees, if any.
Each subsequent change in the amount or maturities of expected cash flows causing a negative change from the initial estimates results in the recognition of an impairment loss in profit or loss.
If the quality of a non-performing exposure improves and there is reasonable certainty of a timely recovery of both principal and interest, in keeping with the relevant initial terms and conditions, the impairment loss is reversed through profit and loss to a value not higher than the amortised cost that would have been incurred if no impairment loss had been recognised.
Outstanding gross loans below 100 thousand Euro as well as those above 100 thousand Euro which went bad over 10 years prior to the reporting date are written down to zero.
Unlikely to pay loans amounting to more than 100 thousand Euro are evaluated individually; the writedown to each loan is equal to the difference between the amount recognised in the balance sheet at the time of recognition (amortised cost) and the current value of expected future cash flows, calculated using the original effective interest rate or, in case of indexed rates, the last contractually applied rate. If the individual evaluation does not indicate any impairment, they are collectively tested for impairment.
Unlikely to pay loans amounting to less than 100 thousand Euro are collectively tested for impairment.
Non-performing past due exposures, as defined by the Bank of Italy, are collectively tested for impairment. Such measurement applies to categories of loans with a homogeneous credit risk. The relevant losses are estimated as a percentage of the original loan amount by taking into account historical
time series based on observable market data existing at the time of measurement and allowing to calculate the latent losses for each category.
Performing loans are collectively tested for impairment. Such measurement applies to categories of loans with a homogeneous credit risk. The relevant losses are estimated as a percentage of the original loan amount by taking into account historical time series based on observable market data existing at the time of measurement and allowing to calculate the latent losses for each category.
Non-performing exposures included in the NPL Area sector are recognised and assessed through the following steps:
Tax receivables are classified under performing loans, since they are due from the Public Administration.
As for the non-performing exposures included in the Corporate Banking and Leasing sectors, they were measured according to the following criteria.
Non-performing loans are individually evaluated, and the total amount of the impairment loss on each loan is equal to the difference between the carrying amount at measurement (amortised cost) and the present value of expected future cash flows, calculated by applying the original effective interest rate. Expected cash flows are calculated taking into account the expected recovery times, the estimated realisable value of guarantees, if any, and the costs expected to be incurred to recover the exposure.
The original effective interest rate of each loan does not change over time even if a restructuring involved changing the contractual rate or the loan no longer bears contractual interest in practice. Any impairment loss is recognised in profit or loss. The impairment loss is reversed in the following years to the extent that the reason for the impairment no longer exists, provided this assessment can be related objectively to an event occurring after the impairment was recognised. The reversal is recognised in profit or loss and shall not exceed the amortised cost that the loan would have had if the impairment had not been recognised.
The restructuring of non-performing exposures by converting them in full or in part into shares in the borrowing firms is measured based on the fair value of the shares received in exchange for the receivable, in accordance with IFRIC 19; such shares are measured at fair value using the methods for equity investments based on their classification for accounting purposes.
For other renegotiations, the Bank derecognises the receivable and recognises a new financial asset if the changes in contractual terms are material.
Restructuring procedures concern loans to customers in financial distress for which the renegotiation resulted in a financial loss for the Bank; in this case, the specific write-down is calculated based on the original interest rate.
The loans for which there is no individual objective evidence that an impairment loss has been incurred, i.e. performing loans, including those to counterparties in high-risk countries, are collectively tested for impairment. Such measurement applies to categories of loans with a homogeneous credit risk. The relevant losses are estimated as a percentage of the original loan amount by taking into account historical time series based on observable market data existing at the time of measurement and allowing to calculate the latent losses for each category. Collective impairment losses are recognised in profit or loss.
At each reporting date, any additional impairment losses or reversals are calculated on a differential basis relative to the entire portfolio of performing receivables at the same date.
A receivable is entirely derecognised when it is considered unrecoverable. Derecognitions are directly recorded under net impairment losses on receivables and are recognised as a reduction of the principal. Partial or complete reversals of previous impairment losses are recognised as a reduction of net impairment losses on receivables.
Sold or securitised financial assets are derecognised exclusively when all relevant risks and rewards have been transferred. Should the company retain part of the relevant risks and rewards, the financial assets will continue to be recognised, even though legal ownership has been actually transferred to a third party.
In such cases, a financial liability is recognised for an amount equal to the consideration received.
If some, but not all, the risks and rewards have been transferred, financial assets are derecognised only if the company no longer has control over them. Otherwise, the financial assets are recognised proportionally to the entity's continuing involvement in them.
Finally, as for the transfer of collection rights, transferred financial assets are derecognised even if contractual rights to receive cash flows are maintained but an obligation to pay such flows to one or more entities is taken on.
The item includes tangible assets used in operations and those held for investment. It also includes those acquired under finance leases.
All property (either fully owned or leased) held by the company for the purposes of obtaining rent and/or a capital gain fall under investment property.
All property (either fully owned or leased) held by the company for business and expected to be used for more than one fiscal year fall under property for functional use.
Property, plant and equipment for functional use include:
Those are physical assets held for use in production, in providing goods and services or for administrative purposes, and that are expected to be used for more than one fiscal year.
This item also includes assets used as a lessee under lease contracts.
A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee.
Leasehold improvements on third-party property are improvements and expenses relating to identifiable and separable asset. Normally, this kind of investment is sustained in order to make a property rented from third parties suitable for use.
Property, plant and equipment and investment property are initially recognised at cost, including all directly attributable costs connected to the acquisition or to bring the asset into use.
Subsequently incurred expenses are added to the carrying amount of the asset, or recognised as separate assets, if they are likely to yield future economic benefits exceeding those initially estimated and if the cost can be measured reliably; otherwise, they are recognised in profit or loss.
Property, plant and equipment and investment property are measured at cost, net of any depreciation or impairment losses.
Property, plant and equipment and investment property with a finite useful life are systematically depreciated on a straight-line basis over their useful life.
Property, plant and equipment and investment property with an indefinite useful life, whose residual value is equal to or higher than their carrying amount, are not depreciated.
For accounting purposes, land and buildings are treated separately, even when acquired together. Land is not depreciated, as it has an indefinite useful life. Where the value of land is included in the value of a building, the former is considered separately by applying the component approach. The separate values of the land and the building are calculated by independent experts in this field and only for entirely owned properties.
The useful life of property, plant and equipment and investment property is reviewed at the closure of each period and, if expectations are not in line with previous estimates, the depreciation rate for the current period and subsequent ones is adjusted.
If there is objective evidence that an individual asset may be impaired, the asset's carrying amount is compared to its recoverable amount, which is the higher of an asset's fair value less costs to sell and its value in use, intended as the present value of future cash flows expected to arise from this asset. Any impairment loss is recognised in profit or loss.
When an impairment loss is reversed, the new carrying amount cannot exceed the net carrying amount that would have been measured if no impairment loss had been recognised on the asset in previous years.
The usually estimated useful lives are the following:
• other: not exceeding 5 years.
• Improvements on third party property/leasehold improvements: not exceeding 5 years
Property, plant and equipment and investment property are derecognised from the statement of financial position on disposal or when they are withdrawn from use and no future economic benefits are expected from their disposal.
Intangible assets are non-monetary assets, identifiable even though they lack physical substance, that meet the requirements of identifiability, control over a resource and existence of future economic benefits. Intangible assets mainly include goodwill and software.
Intangible assets are recognised in the statement of financial position at cost, i.e. the purchase price and any direct cost incurred in preparing the asset for use.
Goodwill is represented by the positive difference between the acquisition cost and the fair value of the acquiree's assets and liabilities and when such positive difference is representative of the capacity to generate returns in the future.
Intangible assets with a finite useful life are systematically amortised according to their estimated useful life.
If there is objective evidence that a single asset may be impaired, the asset's carrying amount is compared to its recoverable amount, which is the higher of an asset's fair value less costs to sell and its value in use, intended as the present value of future cash flows expected to arise from this asset. Any impairment loss is recognised in profit or loss.
Intangible assets with an indefinite useful life are not amortised. The carrying amount is compared with the recoverable amount at least on an annual basis. If the carrying amount is greater than the recoverable amount, a loss equal to the difference between the two amounts is recognised in profit or loss.
Should the impairment of an intangible asset (excluding goodwill) be reversed, the increased net carrying amount cannot exceed the net carrying amount that would have been measured if no impairment loss had been recognised on the asset in previous years.
Goodwill is recognised in the statement of financial position at cost, net of any accrued losses, and is not subject to amortisation. Goodwill is tested for impairment at least annually by comparing its carrying amount to its recoverable amount. To this end, goodwill must be allocated to cash-generating units (CGUs) in compliance with the maximum combination limit that cannot exceed the "operating segment" identified for internal management purposes.
The impairment loss, if any, is calculated based on the difference between the carrying amount of the CGU plus its recoverable amount, which is the higher of the CGU's fair value less costs to sell and its value in use.
The amount of any impairment losses is recognised in profit or loss and is not derecognised in the following years should the reason for the impairment be no longer valid.
An intangible asset is derecognised from the statement of financial position on disposal or when it is withdrawn from use and no future economic benefits are expected from its disposal.
Current and deferred taxes, calculated in compliance with national tax laws, are recognised in profit or loss with the exception of items directly credited or debited to equity.
Current tax liabilities are shown in the statement of financial position net of the relevant tax advances paid for the current period.
Deferred tax assets and liabilities are recognised in the statement of financial position at pre-closing balances and without set-offs, and are included in the items 'tax assets' and 'tax liabilities', respectively.
Deferred tax assets and liabilities are calculated based on temporary differences—without time limits between the value attributed to the asset or liability according to statutory criteria and the corresponding tax base, applying the tax rates expected to be applicable for the year in which the tax asset will be realised, or the tax liability will be settled, according to theoretical tax laws in force at the realisation date.
Deferred tax assets are entered in the statement of financial position according to the likelihood of their recovery, calculated on the basis of the company's (or, due to tax consolidation, the parent company's) ability to continue to generate positive taxable income.
Deferred tax liabilities are entered in the statement of financial position, with the sole exception of the tax-relieved major assets represented by strategic investments not expected to be sold and reserves, as it can be safely assumed that operations giving rise to their taxation will be avoided, based on the amount of already taxed available reserves.
These provisions consist of liabilities arising when:
Should all these conditions not be met, no liability is recognised.
The amount recognised as a provision represents the best estimate of the expense required to meet the obligation and reflects the risks and uncertainties regarding the facts and circumstances in question.
Where the cost deferral is significant, the amount of the provision is determined as the present value of the best estimate of the cost to settle the obligation. In this case a discount rate is used that reflects current market assessments.
The provisions made are periodically reviewed and, if necessary, adjusted to reflect the best current estimate. When the review finds that the cost is unlikely to be incurred, the provision is reversed.
Payables due to banks and customers and outstanding securities include the various forms of interbank funding, as well as funding from customers and through outstanding bonds, net of any buybacks. In addition, payables incurred by the lessee as part of finance lease transactions are also included.
Payables due to banks and customers and outstanding securities are initially recognised at their fair value, which is equal to the consideration received, net of transaction costs directly attributable to the financial liability.
After initial recognition at fair value, these instruments are later measured at amortised cost, using the effective interest method.
Compound debt instruments, connected to equity instruments, foreign currencies, credit instruments or indexes are all considered structured instruments. The embedded derivative is split from the host contract and accounted for separately if the criteria for splitting are met. The embedded derivative is recognised at its fair value and then measured. Any fair value changes are recognised in profit or loss.
The value corresponding to the difference between the total collected amount and the fair value of the embedded derivative is attributed to the host contract and then measured at amortised cost.
Instruments convertible into newly issued treasury shares are considered as structured instruments and imply the recognition, at the date of issue, of a financial liability and an equity component.
The instrument's residual value, resulting from the deduction from its overall value of the value separately calculated for a financial liability without conversion clause with the same cash flows, is attributed to the equity component.
The financial liability is recognised net of directly attributable transaction costs and later measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when they expire or are settled. The difference between the carrying amount and the acquisition cost is recognised in profit or loss.
Liabilities are derecognised also when previously issued securities are bought back, even if such instruments will be sold again in the future. Gains and losses from such derecognition are recognised in profit or loss when the buyback price is higher or lower than the carrying amount.
Subsequent sales of the company's own bonds on the market are considered as an issuance of new debt.
Financial liabilities held for trading refer to derivative contracts that are not hedging instruments.
At initial recognition, financial liabilities held for trading are recognised at fair value.
Also subsequent to initial recognition, financial liabilities held for trading are measured at fair value at the reporting date. The fair value is calculated based on the same criteria as those used for financial assets held for trading.
Financial liabilities held for trading are derecognised when they are settled or when the obligation is fulfilled, cancelled or expired. The difference arising from their derecognition is recognised in profit or loss.
At initial recognition, foreign currency transactions are recognised in the money of account, applying the exchange rate at the date of the transaction.
At each reporting date, including interim periods, foreign currency monetary items are translated using the closing rate.
Non-monetary assets and liabilities recognised at historical cost are translated at the historical exchange rate, while those measured at fair value are translated using the year-end rate. Any exchange differences arising from the settlement of monetary elements or their translation at exchange rates different from those used at initial recognition or in previous financial statements are recognised in profit or loss in the period in which they arise, excluding those relating to available for sale financial assets, as they are recognised in equity.
Pursuant to IAS 19 'Employee benefits' and up to 31 December 2006, the so-called 'TFR' post-employment benefit for employees of the Group's Italian companies was classified as a defined benefit plan. The Group had to recognise this benefit by discounting it using the projected unit credit method.
Following the coming into force of the 2007 Budget Law, which brought the reform regarding supplementary pension plans—as per Legislative Decree no. 252 of 5 December 2005 —forward to 1 January 2007, the employee was given a choice as to whether to allocate the post-employment benefits earned as from 1 January 2007 to supplementary pension funds or to maintain them in the company, which would then transfer it to a dedicated fund managed by INPS (the Italian National Social Security Institute).
This reform has led to changes in the accounting of such benefits as for both the benefits earned up to 31 December 2006 and those earned from 1 January 2007.
In particular:
benefits earned as from 1 January 2007 constitute a defined-contribution plan, regardless of whether the employee has chosen to allocate them to a supplementary pension fund or to INPS's Treasury Fund. Those benefits shall be calculated according to contributions due without applying actuarial methods;
benefits earned up to 31 December 2006 continue to be considered as a defined-benefit plan, and as such are calculated on an actuarial basis which, however, unlike the calculation method applied until 31 December 2006, no longer requires that the benefits be proportionally attributed to the period of service rendered: the employee's service is considered entirely accrued due to the change in the accounting nature of benefits earned as from 1 January 2007.
Actuarial gains/losses shall be included immediately in the calculation of the net obligations to employees through equity, to be reported in other comprehensive income.
They are payments granted to employees or similar parties as remuneration for the services received that are settled in equity instruments.
The relevant international accounting standard is IFRS 2 – Share-based payments; specifically, since the Bank is to settle the obligation for the service received in equity instruments (shares "to the value of", i.e. a given amount is converted into a variable number of shares based on the fair value at grant date), those payments fall under "equity-settled share-based payments".
As a general rule, IFRS 2 requires entities to recognise share-based payment transactions as personnel expenses, with a corresponding increase in equity; the cost is amortised on a straight-line basis over the vesting period.
Pursuant to regulations in force in Italy, buying back treasury shares requires a specific resolution of the shareholders' meeting and the recognition of a specific reserve in equity. Treasury shares in the portfolio are deducted from equity and measured at cost, calculated using the "Fifo" method. Differences between the purchase price and the selling price deriving from trading in these shares during the accounting period are recognised under equity reserves.
Income from management and guarantee services for receivables purchased through factoring activities are recognised under commission income according to their duration. Components considered in the amortised cost to calculate the effective interest rate are excluded and recognised instead under interest income.
Costs are recognised on an accrual basis. Concerning the costs of NPL Area segment, the costs incurred upfront for non-judicial debt collection operations through settlement plans, as well as legal expenses and registration fees for judicial debt collection operations, are recognised in profit or loss under "Other administrative expenses" in the period in which the positive impact of the relevant receivables deriving from the change in the underlying cash flows associated with the plans entered into or the court orders obtained is recognised in profit or loss.
Dividends are recognised in profit or loss in the year in which the resolution concerning their distribution is passed.
Securities received as a result of transactions that contractually require they are subsequently sold, as well as securities delivered as a result of transactions that contractually require they are subsequently repurchased, are not recognised in and/or derecognised from the financial statements.
Consequently, in cases of securities acquired under a repurchase agreement, the amount paid is recognised as due from customers or banks, or as a financial asset held for trading; and in cases of securities sold under a repurchase agreement, the liability is entered under payables due to banks or customers, or under financial liabilities held for trading. Income from these commitments, made up of the coupons matured on the securities and of the difference between their spot price and their forward price, is recognised under interest income in profit or loss.
The two types of transactions are offset if, and only if, they have been carried out with the same counterparty and if such offsetting is contractually envisaged.
The amortised cost of a financial asset or liability is its amount upon initial recognition, net of any principal repayments, plus or minus the overall amortisation of the difference between the initial and the maturity value calculated using the effective interest method, and deducting any impairment losses.
The effective interest method is a method of spreading interest income or interest expense over the duration of a financial asset or liability. The effective interest rate is the rate that precisely discounts expected future payments or cash flows over the life of the financial instrument at the net carrying amount of the financial asset or liability. It includes all the expenses and basis points paid or received between the parties to a contract that are an integral part of such rate, as well as the transaction costs and all other premiums or discounts.
Commissions considered an integral part of the effective interest rate are the initial commissions received for selling or buying a financial asset not classified as measured at fair value: for example, those received as remuneration for the assessment of the debtor's financial situation, for the assessment and the registration of sureties and, in general, for completing the transaction.
Transaction costs, in turn, include fees and commissions paid to agents (including employees that act as sales agents), advisors, brokers and dealers, levies charged by regulatory bodies and stock exchanges, and transfer taxes and duties. Transaction costs do not include financing, internal administration or operating costs.
Fair value is the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date, under current market conditions (i.e. the exit price), regardless of the fact that said price is directly observable or that another measurement approach is used.
IFRS 13 establishes a fair value hierarchy based on the extent to which inputs to valuation techniques used to measure the underlying assets/liabilities are observable. Specifically, the hierarchy consists of three levels.
Each financial asset or liability of the Bank is categorised in one of the above levels, and the relevant measurements may be recurring or non-recurring (see IFRS 13, paragraph 93, letter a).
The choice among the valuation techniques is not optional, since these shall be applied in a hierarchical order: indeed, the fair value hierarchy gives the highest priority to (unadjusted) quoted prices available in active markets for identical assets or liabilities (Level 1 data) and the lowest priority to unobservable inputs (Level 3 data).
Valuation techniques used to measure fair value are applied consistently on an on-going basis.
In the absence of quoted prices in an active market, the fair value measurement of a financial instrument is performed using valuation techniques maximising the use of inputs observable on the market.
The use of a valuation technique is intended to estimate the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. In this case, the fair value measurement may be categorised in Level 2 or Level 3, according to what extent inputs to the pricing model are observable.
In the absence of observable prices in an active market for the financial asset or liability to be measured, the fair value of the financial instruments is measured using the so-called "comparable approach" (Level 2), requiring valuation models based on market inputs.
In this case, the valuation is not based on the quoted prices of the financial instrument being measured (identical asset), but on prices, credit spreads or other factors derived from the official quoted prices of instruments that are substantially similar in terms of risk factors and duration/return, using a given calculation method (pricing model).
In the absence of quoted prices in an active market for a similar instrument, or should the characteristics of the instrument to be measured not allow to apply models using inputs observable in active markets, it is necessary to use valuation models assuming the use of inputs that are not directly observable in the market and, therefore, requiring to make estimates and assumptions (non observable input - Level 3). In these cases, the financial instrument is measured using a given calculation method that is based on specific assumptions regarding:
In the cases described above, entities may make valuation adjustments taking into account the risk premiums considered by market participants in pricing instruments. If not explicitly considered in the valuation model, valuation adjustments may include:
The trade receivables portfolio measured at fair value consists of the on-balance-sheet exposures classified as performing with a residual life exceeding one year (medium-long term8 ). Therefore, all exposures classified as in Default, the ones with a residual life less than one year, and unsecured loans are excluded from the valuation.
For the purposes of measuring performing trade receivables9 at fair value, given the absence of prices directly observable in active and liquid markets, entities shall use valuation techniques based on a theoretical model meeting the requirements of IASs/IFRSs (Level 3). The approach used to determine the fair value of receivables is the Discounted Cash Flow Model, i.e. the discounting of expected future cash flows at a risk free rate for the same maturity, increased by a spread representative of the counterparty's risk of default.
Following Banca IFIS's acquisition of the former GE Capital Interbanca group, the application of IFRS 3 required measuring the acquired entities' portfolios of loans to customers at fair value. The Purchase Price Allocation (PPA) process and the relevant adjustments made to the portfolios (if required) are categorised in level 2 of the fair value hierarchy.
As for the receivables portfolio of the NPL Area, which purchases and manages non-performing receivables mainly due from individuals, the Discounted Cash Flow Model is used to calculate fair value. In
8For short-term receivables, the book value is considered representative of fair value.
9 Including factoring receivables acquired from the former GE Interbanca Group
this case, the expected net cash flows are discounted at a market rate. The market rate is calculated without considering a credit spread, since the credit risk of the individual counterparties is already incorporated in the statistical model used to estimate future cash flows with regard to collective management (non-judicial operations). The model projects the relevant cash flows based on historical evidence concerning the recovery of positions in the Bank's portfolio. As for individual management (judicial operations), the projections of future cash flows are based on an internal algorithm or defined by the manager according to how the underlying receivable is being processed. As for acquired tax receivables, the Bank believes their amortised cost can be used as an approximation of fair value. The only element of uncertainty concerning these receivables due from tax authorities is the time required for collecting them; currently, there are no significant differences in the time it takes for the tax authorities to repay their debts. It should also be noted that Banca IFIS is one of the leading players in this operating segment, which makes it a price maker in the case of sales.
In general, for the purposes of the Level 3 fair value measurement of assets and liabilities, reference is made to:
In compliance with IFRS 13, for fair value measurements categorised within level 3, the Group tests their sensitivity to changes in one or more unobservable inputs used in the fair value measurements. Specifically, a negligible amount of the Group's financial assets measured at fair value are categorised within level 3, except for NPL Area receivables.
Concerning recurring fair value measurements of financial assets and liabilities, the Banca IFIS Group transfers them between levels of the hierarchy based on the following guidelines.
Debt securities are transferred from level 3 to level 2 when the inputs to the valuation technique used are observable at the measurement date. The transfer from level 3 to level 1 is allowed when it is confirmed that there is an active market for the instrument at the measurement date. Finally, they are transferred from level 2 to level 3 when some inputs relevant in measuring fair value are not directly observable at the measurement date.
Equity securities classified as available for sale financial assets are transferred between levels when:
A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: breakdown by fair value level
| FINANCIAL ASSETS/LIABILITIES MEASURED AT | 31.12.2016 | 31.12.2015 | |||||
|---|---|---|---|---|---|---|---|
| FAIR VALUE ON A RECURRING BASIS (in thousands of Euro) |
L1 | L2 | L3 | L1 | L2 | L3 | |
| 1. Financial assets held for trading | - | 39.893 | 7.500 | - | - | 259 | |
| 2. Financial assets at fair value | - | - | - | - | - | - | |
| 3. Available for sale financial assets | 355.626 | 16.586 | 2.017 | 3.216.832 | - | 4.701 | |
| 4. Hedging derivatives | - | - | - | - | - | - | |
| 5. Property, plant and equipment | - | - | - | - | - | - | |
| 6. Intangible assets | - | - | - | - | - | - | |
| Total | 355.626 | 56.479 | 9.517 | 3.216.832 | - | 4.960 | |
| 1. Financial liabilities held for trading | - | 46.447 | 2.031 | - | - | 21 | |
| 2. Financial liabilities at fair value | - | - | - | - | - | - | |
| 3. Hedging derivatives | - | - | - | - | - | - | |
| Total | - | 46.447 | 2.031 | - | - | 21 |
Key
L1= Level 1 fair value of a financial instrument quoted in an active market;
L2= Level 2: fair value measured using valuation techniques based on observable market inputs other than the financial instrument's price; L3= Level 3: fair value calculated using valuation techniques based on inputs not observable in the market.
A.4.5.2 Annual changes in financial assets measured at fair value on a recurring basis (level 3)
| ANNUAL CHANGES IN ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS (LEVEL 3) (in thousands of Euro) |
Financial as sets held for trading |
Financial assets at fair value |
Available for sale financial assets |
Hedging de rivatives |
Property, plant and equipment |
Intangible assets |
|---|---|---|---|---|---|---|
| 1. Opening balance |
259 | - | 4.702 | - | - | - |
| 2. Increases |
7.650 | - | 1.671 | - | - | - |
| 2.1 Purchases |
397 | 1.478 | - | - | - | |
| 2.2 Profit taken to: |
- | - | - | |||
| 2.2.1 Profit or loss | - | - | - | - | - | - |
| - of which: Capital gains | - | - | - | - | - | - |
| 2.2.2 Equity | X | X | 193 | X | - | - |
| 2.3 Transfers from other levels (1) |
- | - | - | - | - | - |
| 2.4 Other increases |
3 | - | - | - | - | - |
| Business combinations | 7.250 | - | - | - | - | - |
| 3. Decreases |
409 | - | 4.356 | - | - | - |
| 3.1 Sales | - | - | - | - | - | - |
| 3.2 Redemptions | 409 | - | - | - | - | - |
| 3.3 Losses taken to: | - | - | - | - | ||
| 3.3.1 Profit or loss | - | - | 4.356 | - | - | - |
| - of which capital losses | - | - | - | - | - | - |
| 3.3.2 Equity | X | X | - | X | - | - |
| 3.4 Transfers to other levels | - | - | - | - | - | - |
| 3.5 Other decreases | - | - | - | - | - | - |
| 4. Closing balance |
7.500 | - | 2.017 | - | - | - |
Level 3 available for sale financial assets refer entirely to equity interests.
| Financial liabilities held for trading |
Financial liabilities at fair value |
Hedging derivatives |
|
|---|---|---|---|
| 1. Opening balance |
317 | - | - |
| 2. Increases |
2.031 | - | - |
| 2.1 Issues |
2.031 | - | - |
| 2.2 Losses taken to: |
- | - | |
| 2.2.1 Profit or loss | - | - | - |
| - of which:capital losses | - | - | - |
| 2.2.2 Equity | X | X | - |
| 2.3 Transfers from other levels |
- | - | - |
| 2.4 Other increases |
- | - | - |
| 3. Decreases |
317 | - | |
| 3.1 Redemptions | 317 | - | |
| 3.2 Repurchases | - | - | - |
| 3.3 Profit taken to: | - | - | |
| 3.3.1 Profit or loss | - | - | - |
| - of which capital gains | - | - | - |
| 3.3.2 Equity | X | X | - |
| 3.4 Transfers to other levels | - | - | - |
| 3.5 Other decreases | - | - | - |
| 4. Closing balance |
2.031 | - | - |
| ASSETS AND LIABILITIES NOT MEAS | 31.12.2016 | 31.12.2015 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| URED AT FAIR VALUE OR MEASURED AT FAIR VALUE ON A NON RECURRING BASIS |
BV | L1 | L2 | L3 | BV | L1 | L2 | L3 | |
| 1. Held to maturity financial assets | - | - | - | - | - | - | - | - | |
| 2. Due from banks | 1.393.358 | - | - | 1.393.358 | 95.352 | - | - | 95.352 | |
| 3. Loans to customers | 5.928.212 | - | - | 5.957.897 | 3.437.136 | - | - | 3.452.700 | |
| 4. Property, plant and equipment held for investment purpose |
719 | - | - | 926 | 720 | - | - | 926 | |
| 5. Non-current assets and disposal groups | - | - | - | - | - | - | - | - | |
| Total | 7.322.289 | - | - | 7.352.181 | 3.533.208 | - | - | 3.548.978 | |
| 1. Due to banks | 503.964 | - | - | 503.964 | 662.985 | - | - | 662.985 | |
| 2. Due to customers | 5.045.136 | - | - | 5.065.578 | 5.487.476 | - | - | 5.491.311 | |
| 3. Debt securities issued | 1.488.556 | 83.173 | - | 1.405.334 | - | - | - | - | |
| 4. Liabilities associated with non-current assets |
- | - | - | - | - | - | - | - | |
| Total | 7.037.656 | 83.173 | - | 6.974.876 | 6.150.461 | - | - | 6.154.296 |
Key
BV= book value
L1= Level 1
L2= Level 2 L3= Level 3
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| a) Cash | 34 | 34 |
| b) On demand deposits at Central banks | - | - |
| Total | 34 | 34 |
| 31.12.2016 | 31.12.2015 | ||||||
|---|---|---|---|---|---|---|---|
| Type/Amounts | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |
| A. On-balance-sheet assets | Level 1 | Level 2 | Level 3 | ||||
| 1. Debt securities | - | - | - | ||||
| 1.1 Structured | - | - | - | - | - | - | |
| 1.2 Other | - | - | - | - | - | - | |
| 2. Equity securities | - | - | - | - | - | - | |
| 3. UCITS units | - | - | - | - | - | - | |
| 4. Loans | - | - | - | - | - | - | |
| 4.1 Reverse repurchase agreements | - | - | - | - | - | - | |
| 4.2 Other | - | - | - | - | - | - | |
| Total A | - | - | - | - | - | - | |
| B. Derivatives | - | - | - | ||||
| 1. Financial derivatives | 39.893 | 7.500 | - | - | 259 | ||
| 1.1 For trading | - | 39.893 | 7.500 | - | - | 259 | |
| 1.2 connected to the fair value option | - | - | - | - | - | - | |
| 1.3 other | - | - | - | - | - | - | |
| 2. Credit derivatives | - | - | - | - | - | - | |
| 2.1 For trading | - | - | - | - | - | - | |
| 2.2 connected to the fair value option | - | - | - | - | - | - | |
| 2.3 other | - | - | - | - | - | - | |
| Total B | - | 39.893 | 7.500 | - | - | 259 | |
| Total (A+B) | - | 39.893 | 7.500 | - | - | 259 |
The financial assets and liabilities held for trading outstanding at 31 December 2016 were incorporated with the acquisition of the former GE Capital Interbanca Group and referred to interest rate derivatives that Interbanca S.p.A. negotiated with its Corporate clients up to 2009 to provide them with instruments to hedge risks such as fluctuations in interest rates. In order to remove market risk, all outstanding transactions are hedged with "back to back" trades, in which Interbanca assumed a position opposite to the one sold to corporate clients with independent market counterparties.
Level 3 assets include 2,0 million Euro in cross currency swaps with other banks.
| 2.2 Financial assets held for trading: breakdown by debtor/issuer | |||
|---|---|---|---|
| Type/Amounts | 31.12.2016 | 31.12.2015 |
|---|---|---|
| A. On-balance-sheet assets | ||
| 1. Debt securities | - | - |
| a) Governments and Central banks | - | - |
| b) Other public entities | - | - |
| c) Banks | - | - |
| d) Other issuers | - | - |
| 2. Equity securities | - | - |
| a) Banks | - | - |
| b) Other issuers: | - | - |
| - insurance companies | - | - |
| - financial companies | - | - |
| - non-financial companies | - | - |
| - other | - | - |
| 3. UCITS units | - | - |
| 4. Loans | - | - |
| a) Governments and Central banks | - | - |
| b) Other public entities | - | - |
| c) Banks | - | - |
| d) Other issuers | - | - |
| Total A | - | - |
| B. Derivatives | ||
| a) Banks | ||
| - fair value | 4.340 | 259 |
| b) Customers | - | |
| - fair value | 43.053 | - |
| Total B | 47.393 | 259 |
| Total (A+B) | 47.393 | 259 |
4.1 Available for sale financial assets: breakdown by type
| 31.12.2016 | 31.12.2015 | ||||||
|---|---|---|---|---|---|---|---|
| Type/Amounts | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |
| 1. Debt securities | 353.150 | - | - | 3.216.832 | - | - | |
| 1.1 Structured | - | - | - | - | - | - | |
| 1.2 Other | 353.150 | - | - | 3.216.832 | - | - | |
| 2. Equity securities | 2.476 | 12.647 | 2.017 | - | - | 4.701 | |
| 2.1 At fair value | 2.476 | 12.647 | 2.017 | - | - | 4.030 | |
| 2.2 At cost | - | - | - | - | - | 671 | |
| 3. UCITS units | - | 3.939 | - | - | - | - | |
| 4. Loans | - | - | - | - | - | - | |
| Total | 355.626 | 16.586 | 2.017 | 3.216.832 | - | 4.701 |
Level 1 "other debt securities" refer to Italian government bonds, either fixed-rate and very short-term bonds or floating-rate and medium-term ones.
These securities have been mainly used for short-/very short-term repurchase agreements with banks, on the MTS platform or on the Eurosystem.
The decrease in debt securities was largely attributable to the 2,9 billion Euro worth of instruments sold during the year, resulting in a 5,5 million Euro gain.
Level 3 equity instruments refer to non-controlling interests. The increase was the result of the 15,1 million Euro contribution from the former Interbanca Group and the 1,5 million Euro acquisition of an interest in Cassa di Risparmio di Cesena after paying a contribution to Italy's Interbank Deposit Protection Fund (FITD, Fondo Interbancario di Tutela dei Depositi) as payment for the bank's capital increase. During the year, the Group recognised a 4,4 million Euro write-down of the equity interests in two investees after they were tested for impairment.
| Type/Amounts | 31.12.2016 | 31.12.2015 |
|---|---|---|
| 1. Debt securities | 353.150 | 3.216.832 |
| a) Governments and Central banks | 353.150 | 3.216.832 |
| b) Other public entities | - | - |
| c) Banks | - | - |
| d) Other issuers | - | - |
| 2. Equity securities | 17.140 | 4.701 |
| a) Banks | 1.135 | 4.022 |
| b) Other issuers: | 16.005 | 679 |
| - insurance companies | - | - |
| - financial companies | 8.878 | 672 |
| - non-financial companies | 7.127 | 7 |
| - other | - | - |
| 3. UCITS units | 3.939 | - |
| 4. Loans | - | - |
| a) Governments and Central banks | - | - |
| b) Other public entities | - | - |
| c) Banks | - | - |
| d) Other issuers | - | - |
| Total | 374.229 | 3.221.533 |
| 31.12.2016 | 31.12.2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Type / Amounts | 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 | 1.063.831 | - | - | 1.063.831 | 14.446 | 14.446 | ||
| 1. Term deposits | - | X | X | X | - | X | X | X |
| 2. Legal reserve | 1.019.000 | X | X | X | 14.446 | X | X | X |
| 3. Repurchase agreements | - | X | X | X | - | X | X | X |
| 4. Others | 44.831 | X | X | X | - | X | X | X |
| B. Due from banks | 329.527 | - | - | 329.527 | 80.906 | - | - | 80.906 |
| 1. Loans | 331.430 | - | - | 331.430 | 75.896 | - | - | 75.896 |
| 1.1 Current accounts and on de mand deposits |
239.590 | X | X | X | X | X | X | X |
| 1.2 Term deposits | 88.034 | X | X | X | - | X | X | X |
| 1.3 Other loans: | 1.903 | - | - | - | - | X | X | X |
| - Reverse repurchase agree ments |
- | X | X | X | - | X | X | X |
| - Finance leases | 1 | X | X | X | - | X | X | X |
| - Other | 1.902 | X | X | X | - | X | X | X |
| 2. Debt securities | - | - | - | - | 5.010 | - | - | 5.010 |
| 2.1 Structured | - | X | X | X | - | X | X | X |
| 2.2 Other | - | X | X | X | 5.010 | X | X | X |
| Total 1.393.358 | - | - | 1.393.358 | 95.352 | 95.352 |
Key
FV= fair value BV= book value
Lending to other banks is not part of the Group's core business: the excess liquidity ensures the margin required to carry out banking operations as well as the funds necessary to seize potential market opportunities.
The fair value of receivables due from banks is in line with the relevant book value, considering the fact that interbank deposits are short- or very short-term indexed-rate instruments.
Other debt securities outstanding at the end of 2015, referring to bonds issued by banks which, given their characteristics, are classified under due from banks, were repaid during 2016.
| 3 1. 1 2. 2 0 1 6 |
3 1. 1 2. 2 0 1 5 |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ty / Am ts p e ou n |
Bo k v lue o a |
Fa ir v lue a |
Bo k v lue o a |
Fa ir v lue a |
||||||||
| Pe for ing r m |
No n-p er |
for ing m |
1 L |
2 L |
3 L |
Pe for r m- ing |
No n-p er |
for ing m |
1 L |
2 L |
3 L |
|
| Pu ha d rc se |
O t he rs |
Pu ha d rc se |
O t he rs |
|||||||||
| Lo an s |
4. 9 5 6. 0 5 1 |
5 6 2. 3 2 9 |
3 9 9. 9 4 8 |
2. 9 5 4. 0 9 0 |
3 5 4. 3 3 1 |
1 2 8. 7 1 5 |
- | - | 3. 4 5 2. 7 0 0 |
|||
| 1. Cu t a ts rre n cco un |
5 1. 1 7 4 |
2 5. 1 1 2 |
1 2. 0 7 2 |
X | X | X | 9 4. 4 5 6 |
8. 2 9 8 |
1 6. 1 0 0 |
X | X | X |
| 2. Re ha ts p urc se ag ree me n |
- | - | - | X | X | X | - | - | - | X | X | X |
| 3. Lo /m tg an s or ag es |
2 4. 0 8 7 7 |
3. 4 6 6 |
1 4. 4 6 5 7 |
X | X | X | 6. 9 0 3 |
2. 9 9 3 |
- | X | X | X |
| 4. Cr d i ds l loa t c e ar p ers on a ns , d s lar ba ke d loa an a y- c ns |
1 2 1 5. 5 |
3 0 6 9 5. 7 |
1. 2 2 7 |
X | X | X | - | 1 6 2. 9 4 5 |
- | X | X | X |
| 5. F ina lea nce se s |
8 1 4. 9 1 4 |
2 4 0 |
1 2. 9 4 7 |
X | X | X | 5 | 8 3 3 |
- | X | X | X |
| 6. Fa tor ing c |
2. 7 1 1. 3 4 0 |
- | 1 8 0. 2 4 4 |
X | X | X | 2. 5 3 2. 8 1 9 |
- | 1 0 2. 3 8 9 |
X | X | X |
| 7. O he loa t r ns |
6 3 8. 3 9 4 |
2 2 7. 8 1 4 |
3 8. 4 9 6 |
X | X | X | 3 1 9. 9 0 7 |
1 7 9. 7 1 2 |
1 0. 2 2 6 |
X | X | X |
| De b i ies t s t ec ur |
- | - | 9. 8 8 4 |
- | - | - | - | - | - | - | - | - |
| 8 S tru tur d c e |
- | - | - | X | X | X | - | - | - | X | X | X |
| 9 O t he r |
- | - | 9. 8 8 4 |
X | X | X | - | - | - | X | X | X |
| To l ta |
4. 9 5 6. 0 5 1 |
5 6 2. 3 2 9 |
4 0 9. 8 3 2 |
- | - | 5. 9 5 7. 8 9 7 |
2. 9 5 4. 0 9 0 |
3 5 4. 3 3 1 |
1 2 8. 7 1 5 |
- | - | 3. 4 5 2. 7 0 0 |
Acquired non-performing exposures mainly refer to the distressed retail loans of the NPL area. whose business is by nature closely associated with recovering impaired assets. Therefore, loans in the NPL Area sector are recognised under bad loans or unlikely to pay. In particular, those loans maintain the same classification as that assigned by the invoice seller, provided the latter is subject to the same law as Banca IFIS: otherwise, if the Bank has not ascertained the debtor's state of insolvency, those loans are classified as unlikely to pay.
Performing loans classified under "Other transactions" refer to tax receivables (124,6 million Euro) and the margin lending related to repurchase agreements on government bonds on the MTS platform (4,7 million Euro).
| Type/Amounts | 31.12.2016 | 31.12.2015 | |||||
|---|---|---|---|---|---|---|---|
| Non-performing | Non-performing | ||||||
| Performing | Purchased | Others | Performing | Purchased | Others | ||
| 1. Debt securities: | - | - | 9.884 | - | - | - | |
| a) Governments | - | - | - | - | - | - | |
| b) Other public entities | - | - | - | - | - | - | |
| c) Other issuers | - | - | 9.884 | - | - | - | |
| - non-financial companies | - | - | 9.884 | - | - | - | |
| - financial companies | - | - | - | - | - | - | |
| - insurance companies | - | - | - | - | - | - | |
| - other | - | - | - | - | - | - | |
| 2. Loans to: | 4.956.051 | 562.329 | 399.948 | 2.954.090 | 354.331 | 128.715 | |
| a) Governments | 95.011 | - | 11.484 | 104.088 | - | 1.041 | |
| b) Other public entities | 799.917 | 1 | 42.229 | 895.162 | 1 | 6.580 | |
| c) Other parties | 4.061.123 | 562.328 | 346.235 | 1.954.840 | 354.330 | 121.094 | |
| - non-financial companies | 3.344.966 | 27.595 | 280.942 | 1.824.749 | 16.747 | 108.357 | |
| - financial companies | 72.206 | 99 | 29.969 | 114.927 | 95 | 6.666 | |
| - insurance companies | - | - | - | - | - | - | |
| - other | 643.951 | 534.634 | 35.324 | 15.164 | 337.488 | 6.071 | |
| Total | 4.956.051 | 562.329 | 409.832 | 2.954.090 | 354.331 | 128.715 |
| Future minimum lease payments |
Current value of future minimum lease payments |
|
|---|---|---|
| Within 1 year | 330.333 | 306.193 |
| Between 1 and 5 years | 619.699 | 613.878 |
| Over 5 years | 5.093 | 4.657 |
| Total- | 955.125 | 924.728 |
| Deferred financial profits | - | - |
| Bad debt provision | (41.924) | (41.924) |
| Recognised receivables | 913.201 | 882.804 |
The reported amounts refer to IFIS Leasing, a subsidiary of Interbanca.
Section 12 – Property, plant and equipment and investment property – Item 120 12.1 Property, plant and equipment for functional use: breakdown of assets measured at cost
| Assets/Amounts | 31.12.2016 | 31.12.2015 | |
|---|---|---|---|
| 1. Owned | 105.877 | 47.523 | |
| a) Land | 35.892 | 6.738 | |
| b) Buildings | 62.735 | 37.899 | |
| c) Furnishings | 1.780 | 641 | |
| d) Electronic systems | 4.298 | 1.480 | |
| e) Others | 1.172 | 765 | |
| 2. 2.2 Acquired under finance leases | 3.751 | 3.920 | |
| a) Land | - | - | |
| b) Buildings | 3.718 | 3.862 | |
| c) Furnishings | - | - | |
| d) Electronic systems | - | - | |
| e) Others | 33 | 58 | |
| Total | 109.628 | 51.443 |
The significant increase in this line item compared to the end of 2015 was largely due to the contribution from the former GE Capital Interbanca Group as well as the capitalisation of the costs for the restructuring of the property in Florence that houses the new headquarters of the NPL business area.
At the end of the period, the properties recognised under property, plant and equipment and investment property included the important historical building "Villa Marocco", located in Mestre – Venice and housing Banca IFIS's registered office, as well as, following the acquisition of the former GE Capital Interbanca Group, two buildings in Milan, housing the registered offices of Interbanca S.p.A. and some Group companies.
Since Villa Marocco is a luxury property, it is not amortised, but it is tested for impairment at least annually. To this end, they are appraised by experts specialising in luxury properties. During the year, there were no indications requiring to test the assets for impairment.
| 31.12.2016 | 31.12.2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Assets/Amounts | Book | Fair value | Book | Fair value | ||||
| value | L1 | L2 | L3 | value | L1 | L2 | L3 | |
| 1. Owned | 720 | - | - | 926 | 720 | - | - | 926 |
| a) Land | - | - | ||||||
| b) Buildings | 720 | 926 | 720 | 926 | ||||
| 2. 2.2 Acquired under finance leases | - | - | - | - | - | - | - | - |
| a) Land | - | - | ||||||
| b) Buildings | - | - | ||||||
| Total | 720 | - | - | 926 | 720 | - | - | 926 |
| Land | Buildings | Furnish ings |
Electronic systems |
Others | To tal 31.12.2 016 |
|
|---|---|---|---|---|---|---|
| A. Gross opening balance | 6.738 | 43.866 | 4.802 | 6.493 | 1.961 | 63.860 |
| A.1 Total net depreciation and impairment | - | (2.105) | (4.160) | (5.013) | (1.139) | (12.417) |
| losses A.2 Net opening balance |
6.738 | 41.761 | 642 | 1.480 | 822 | 51.443 |
| B. Increases | 29.154 | 25.239 | 1.398 | 4.311 | 758 | 60.860 |
| B.1 Purchases | 29.154 | 25.239 | 1.398 | 4.311 | 743 | 60.845 |
| of which: business combinations | 29.154 | 15.866 | 571 | 667 | 177 | 46.435 |
| B.2 Capitalised improvement expenses | - | - | - | - | - | - |
| B.3 Reversals of impairment losses | - | - | - | - | 6 | 6 |
| B.4 Fair value gains taken to: | - | - | - | - | - | - |
| a) equity | - | - | - | - | - | - |
| b) profit or loss | - | - | - | - | - | - |
| B.5 Exchange gains | - | - | - | - | - | - |
| B.6 Transfers from investment property | - | - | - | - | - | - |
| B.7 Other changes | - | - | - | - | 9 | 9 |
| C. Reductions | - | (547) | (260) | (1.493) | (375) | (2.675) |
| C.1 Sales | - | - | (2) | (4) | (149) | (155) |
| C.2 Depreciation | - | (547) | (258) | (1.489) | (197) | (2.491) |
| C.3 Impairment losses taken to: | - | - | - | - | - | - |
| a) equity | - | - | - | - | - | - |
| b) profit or loss | - | - | - | - | - | - |
| C.4 Fair value losses taken to: | - | - | - | - | - | - |
| a) equity | - | - | - | - | - | - |
| b) profit or loss | - | - | - | - | - | - |
| C.5 Exchange losses | - | - | - | - | - | - |
| C.6 Transfers to | - | - | - | - | - | - |
| a) Investment property | - | - | - | - | - | - |
| b) Assets under disposal | - | - | - | - | - | - |
| C.7 Other changes | - | - | - | - | (29) | (29) |
| D. Net closing balance | 35.892 | 66.453 | 1.780 | 4.298 | 1.205 | 109.628 |
| D.1 Total net depreciation and impairment | - | 19.877 | 9.152 | 20.069 | 976 | 50.074 |
| losses D.2 Gross closing balance |
35.892 | 86.330 | 10.932 | 24.367 | 2.181 | 159.702 |
| E. Measurement at cost | - | - | - | - | - | - |
Property, plant and equipment for functional use are measured at cost and are depreciated on a straight-line basis over their useful life, with the exclusion of land with an indefinite useful life and the "Villa Marocco" property, whose residual value at the end of its useful life is expected to be higher than its book value.
As for buildings, excluding the contribution from the acquisition of the former GE Capital Interbanca Group, the purchases referred largely to the capitalisation of the costs for restructuring the property in Florence that houses the new headquarters of the NPL business area.
Property, plant and equipment not yet brought into use at the reporting date are not depreciated.
| 31.12.2016 | |||||
|---|---|---|---|---|---|
| Land | Buildings | ||||
| A. Opening balance | - | 720 | |||
| B. Increases | - | - | |||
| B.1 Purchases | - | - | |||
| B.2 Capitalised improvement expenses | - | - | |||
| B.3 Fair value gains: | - | - | |||
| B.4 Reversals of impairment losses | - | - | |||
| B.5 Exchange gains | - | - | |||
| B.6 Transfers from property for functional use | - | - | |||
| B.7 Other changes | - | - | |||
| C. Reductions | - | - | |||
| C.1 Sales | - | - | |||
| C.2 Depreciation | - | - | |||
| C.3 Fair value losses | - | - | |||
| C.4 Impairment losses | - | - | |||
| C.5 Exchange losses | - | - | |||
| C.6 Transfers to other asset portfolios | - | - | |||
| a) assets for functional use | - | - | |||
| b) non-current assets under disposal | - | - | |||
| C.7 Other changes | - | - | |||
| D. Closing balance | - | 720 | |||
| E. Measurement at fair value | - | 926 |
Buildings held for investment purposes are measured at cost and refer to leased property. They are not amortised as they are destined for sale.
| Assets/Amounts | 31.12.2016 | 31.12.2015 | ||
|---|---|---|---|---|
| Finite life | Indefinite life | Finite life | Indefinite life | |
| A.1 Goodwill: | X | 799 | X | 820 |
| A.1.1 Attributable to owners of the parent company | X | 799 | X | 820 |
| A.1.2 Non-controlling interests | X | - | X | - |
| A.2 Other intangible assets | 14.182 | - | 6.350 | - |
| A.2.1 Assets measured at cost: | 14.182 | - | 6.350 | - |
| a) Internally generated intangible assets | - | - | - | - |
| b) Other assets | 14.182 | - | 6.350 | - |
| A.2.2 Assets measured at fair value: | - | - | - | - |
| a) Internally generated intangible assets | - | - | - | - |
| b) Other assets | - | - | - | - |
| Total | 14.182 | 799 | 6.350 | 820 |
Goodwill, amounting to 799 thousand Euro, arises from the line-by-line consolidation of the Polish subsidiary IFIS Finance Sp. Z o. o..
The above-mentioned goodwill was tested for impairment in accordance with IAS 36 (Impairment Test). To do so, goodwill was allocated to the cash-generating unit corresponding to the whole company IFIS Finance, as it represents an autonomous business segment which cannot be further broken down. The test was carried out by applying the value in use method based on the projection of expected cash flows for an explicit period of 5 years. Expected cash flows were discounted based on the company's estimated cost of capital calculated using the Capital Asset Pricing Model. Expected cash flows were estimated based on the most recently approved business plan and financial projections based on the subsidiary's average growth trends. The terminal value was calculated assuming that the last net cash flow in the explicit planning period is replicable. The impairment test did not reveal any impairment losses to be recognised in profit or loss.
Finally, goodwill underwent a sensitivity analysis based on the cost of capital, using a fluctuation range equal to 5%; the test carried out with the control method confirmed the reliability of the reported amount.
The change in the value of goodwill compared to the previous year is attributable to the impact of changes in year-end exchange rates.
Other intangible assets at 31 December 2016 refer exclusively to software purchase and development, amortised on a straight-line basis over the estimated useful life, which is 5 years from deployment.
| Other intangible assets: |
Other intangible | ||||||
|---|---|---|---|---|---|---|---|
| Goodwill | internally generated | assets: other |
Total 31.12.2016 |
||||
| FINITE | INDEF | FINITE | INDEF | ||||
| A. Opening balance | 820 | - | - | 6.350 | - | 7.170 | |
| A.1 Total net depreciation and impairment losses | - | - | - | - | - | - | |
| A.2 Net opening balance | 820 | - | - | 6.350 | - | 7.170 | |
| B. Increases | - | - | - | 11.402 | - | 11.402 | |
| B.1 Purchases | - | - | - | 11.402 | - | 11.402 | |
| of which: business combinations | - | - | - | 1.134 | - | 1.134 | |
| B.2 Increases in internally generated intangible as sets |
X | - | - | - | - | - | |
| B.3 Reversals of impairment losses | X | - | - | - | - | - | |
| B.4 Fair value gains: | |||||||
| - to equity | X | - | - | - | - | - | |
| - to profit or loss | X | - | - | - | - | - | |
| B.5 Exchange gains | - | - | - | - | - | - | |
| B.6 Other changes | - | - | - | - | - | - | |
| C. Reductions | 21 | - | - | 3.570 | - | 3.591 | |
| C.1 Sales | - | - | - | - | - | - | |
| C.2 Impairment losses and amortisation: | - | - | - | 3.570 | - | 3.570 | |
| - Amortisation expense | X | - | - | 3.570 | - | 3.570 | |
| - Impairment losses | - | - | - | - | - | - | |
| + equity | X | - | - | - | - | - | |
| + profit or loss | - | - | - | - | - | - | |
| C.3 Fair value losses: | - | - | - | - | - | ||
| - to equity | X | - | - | - | - | - | |
| - to profit or loss | X | - | - | - | - | - | |
| C.4 Transfer to non-current assets under disposal | - | - | - | - | - | - | |
| C.5 Exchange losses | 21 | - | - | - | - | 21 | |
| C.6 Other changes | - | - | - | - | - | - | |
| D. Net closing balance | 799 | - | - | 14.182 | - | 14.981 | |
| D.1 Total net amortisation, impairment losses and reversals of impairment losses |
- | - | - | - | - | ||
| E. Gross closing balance | 799 | - | - | 14.182 | - | 14.981 | |
| F. Measurement at cost | - | - | - | ||||
Key
Fin: finite useful life Indef: indefinite useful life
Purchases refer exclusively to investments for the enhancement of IT systems. The contribution from the acquisition of the former GE Capital Interbanca Group amounted to 1,1 million Euro.
The main types of deferred tax assets are set out below.
| Deferred tax assets | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Differences from PPA | 253.030 | - |
| Loans to customers (Law 214/2011) | 192.310 | - |
| Loans to customers | 42.978 | 38.058 |
| Equipment rental | 1.460 | - |
| Provisions for risks and charges | 1.209 | 561 |
| Others | 2.193 | 803 |
| Total | 493.180 | 39.442 |
Deferred tax assets, amounting to 493,1 million Euro, included 253 million Euro in misalignments found during the acquisition of the former GE Capital Interbanca Group (PPA) and 228,5 million Euro in value adjustments on receivables that can be deducted in the following years.
The main types of deferred tax liabilities are shown below.
| Deferred tax liabilities | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Loans to customers | 13.292 | 15.257 |
| Property, plant and equipment | 9.433 | 309 |
| Available for sale securities | 394 | 5.770 |
| Others | 1.315 | 60 |
| Total | 24.434 | 21.396 |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| 1. Opening balance | 39.359 | 38.342 |
| 2. Increases | 458.021 | 2.256 |
| 2.1 Deferred tax assets recognised in the year | 7.494 | 2.256 |
| a) relative to previous years | 30 | - |
| b) due to change in accounting standards | - | - |
| c) reversals of impairment losses | - | - |
| d) other | 7.464 | 2.256 |
| 2.2 New taxes or increases in tax rates | - | - |
| 2.3 Other increases | - | - |
| Business combinations | 450.527 | |
| 3. Decreases | 4.737 | 1.239 |
| 3.1 Deferred tax assets reversed during the year | 4.737 | 782 |
| a) reversals | 4.737 | 782 |
| b) impairment losses due to unrecoverability | - | - |
| c) change in accounting standards | - | - |
| d) other | - | - |
| 3.2 Reductions in tax rates | - | - |
| 3.3 Other reductions | - | 457 |
| a) conversion into tax credits as per Italian Law 214/2011 | - | - |
| b) other | - | 457 |
| 4. Closing balance | 492.643 | 39.359 |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| 1. Opening balance | - | - |
| 2. Increases | 191.417 | - |
| Business combinations | 191.417 | - |
| 3. Decreases | - | - |
| 3.1 Reclassifications | - | - |
| 3.2 Conversion in tax credits | - | - |
| a) deriving from losses for the year | - | - |
| b) deriving from tax losses | - | - |
| 3.3 Other reductions | - | - |
| 4. Closing balance | 191.417 | - |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| 1. Opening balance | 15.643 | 11.432 |
| 2. Increases | 9.561 | 4.574 |
| 2.1 Deferred tax liabilities recognised in the year | 99 | 4.574 |
| a) relative to previous years | - | - |
| b) due to change in accounting standards | - | - |
| c) other | 99 | 4.574 |
| 2.2 New taxes or increases in tax rates | - | - |
| 2.3 Other increases | - | - |
| Business combinations | 9.462 | - |
| 3. Decreases | 1.985 | 363 |
| 3.1 Deferred tax liabilities reversed during the year | 695 | 16 |
| a) reversals | 694 | 16 |
| b) due to change in accounting standards | - | - |
| c) other | 1 | - |
| 3.2 Reductions in tax rates | - | - |
| 3.3 Other reductions | 1.290 | 347 |
| 4. Closing balance | 23.219 | 15.643 |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| 1. Opening balance | 63 | - |
| 2. Increases | 584 | 63 |
| 2.1 Deferred tax assets recognised in the year | 104 | 63 |
| a) relative to previous years | - | - |
| b) due to change in accounting standards | - | - |
| c) other | 104 | 63 |
| 2.2 New taxes or increases in tax rates | - | - |
| 2.3 Other increases | - | - |
| Business combinations | 480 | |
| 3. Decreases | 110 | - |
| 3.1 Deferred tax assets reversed during the year | 110 | - |
| a) reversals | 110 | - |
| b) impairment losses due to unrecoverability | - | - |
| c) due to change in accounting standards | - | - |
| d) other | - | - |
| 3.2 Reductions in tax rates | - | - |
| 3.3 Other reductions | - | - |
| 4. Closing balance | 537 | 63 |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| 1. Opening balance | 5.753 | 2.836 |
| 2. Increases | 835 | 2.948 |
| 2.1 Deferred tax liabilities recognised in the year | 268 | 2.948 |
| a) relative to previous years | 17 | - |
| b) due to change in accounting standards | - | - |
| c) other | 251 | 2.948 |
| 2.2 New taxes or increases in tax rates | - | - |
| 2.3 Other increases | - | - |
| Business combinations | 567 | |
| 3. Decreases | 5.373 | 31 |
| 3.1 Deferred tax liabilities reversed during the year | 5.373 | 15 |
| a) reversals | 5.373 | 15 |
| b) due to change in accounting standards | - | - |
| c) other | - | - |
| 3.2 Reductions in tax rates | - | - |
| 3.3 Other reductions | - | 16 |
| 4. Closing balance | 1.215 | 5.753 |
| 31.12.2016 | 31.12.2015 | ||
|---|---|---|---|
| Receivables due from tax authorities | 57.737 | 18.055 | |
| Prepayments and accrued income | 39.905 | 19.875 | |
| Guarantee deposits | 1.211 | 7.886 | |
| Securitisation transactions | 20 | 301 | |
| Other items | 150.701 | 36.219 | |
| Total | 249.574 | 82.336 |
Receivables due from Italian tax authorities included 7,2 million Euro in payments on account (stamp duty and withholding taxes), 27,9 million Euro in funds placed in an escrow account pending the resolution of a dispute, and 15,0 million Euro in VAT credits claimed.
Prepayments and accrued income included 18,7 million Euro in prepayments related to the NPL Area segment's debt collection costs, 3,1 million Euro in interest on arrears due from the Public Administration, and 2,1 million Euro in prepaid interests in favour of customers with a fixed-term rendimax account.
Other items included a 43,9 million Euro receivable due from the parent company La Scogliera S.p.A. deriving from the tax consolidation regime as well as 26,9 million Euro in receivables due from the buyers of NPL portfolios.
Section 1 – Due to banks - Item 10
| Type of operation/Components of group | 31.12.2016 | 31.12.2015 |
|---|---|---|
| 1. Due to Central banks | 1.179 | 119.792 |
| 2. Due to banks | 502.785 | 543.193 |
| 2.1 Current accounts and on demand deposits | 55.480 | 25.241 |
| 2.2 Term deposits | 396.419 | 133.727 |
| 2.3 Loans | 50.886 | 384.225 |
| 2.3.1 Repurchase agreements | 50.886 | 384.225 |
| 2.3.2 Other | - | - |
| 2.4 Debt from buyback commitments on treasury equity instruments | - | - |
| 2.5 Other payables | - | - |
| Total | 503.964 | 662.985 |
| Fair value - level 1 | - | - |
| Fair value - level 2 | - | - |
| Fair value - level 3 | 503.964 | 662.985 |
| Total fair value | 503.964 | 662.985 |
The fall in Payables due to banks from the previous year was the result of the early repayment of the TLTRO loan received in December 2014 and the decline in repurchase agreements entered into with other banks.
The fair value of payables due to banks is in line with the relevant carrying amount, considering the fact that interbank deposits are short- or very short-term.
| Type of operation/Components of group | 31.12.2016 | 31.12.2015 |
|---|---|---|
| 1. Current accounts and on demand deposits | 931.879 | 748.487 |
| 2. Term deposits | 3.824.401 | 2.447.604 |
| 3. Loans | 275.987 | 2.282.967 |
| 3.1 repurchase agreements | 270.314 | 2.278.983 |
| 3.2 other | 5.673 | 3.984 |
| 4. Debt from buyback commitments on treasury equity instruments | - | - |
| 5. Other payables | 12.869 | 8.418 |
| Total | 5.045.136 | 5.487.476 |
| Fair value - level 1 | - | - |
| Fair value - level 2 | - | - |
| Fair value - level 3 | 5.065.578 | 5.491.311 |
| Total fair value | 5.065.578 | 5.491.311 |
Current accounts and on demand deposits at 31 December 2016 included funding from the on demand rendimax savings account and the contomax online current account, amounting to 772,7 million and 23,7 million Euro, respectively; term deposits included 3.722,9 million Euro in funding from the fixedterm rendimax and contomax accounts.
Repurchase agreements were entered into with Cassa di Compensazione e Garanzia as counterparty and government bonds as the underlying assets.
It should be noted that the Group does not carry out "term structured repo" transactions.
Other loans refer mainly to payables for finance leases; they are recognised by using the financial method set out in IAS 17 to measure the leased property housing the NPL area, as detailed in paragraph 2.5 below.
Other payables refer largely to payables to sellers of tax or non-performing receivables portfolios with deferred price settlement.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Payables for finance leases | 3.802 | 3.984 |
The payables described above relate for 3,8 million Euro to the real estate lease the former company Toscana Finanza SpA entered into in 2009 for the property located in Florence, which housed the headquarters of the NPL Area until August 2016. The term of the lease entered into with Centro Leasing S.p.A. is 18 years (from 01.03.2009 to 01.03.2027) and provides for the payment of 216 monthly instalments of 28.490 Euro, including the principal, interest and an option to buy the asset at the end of the lease for 1.876.800 Euro.
Please see part E, letter D of these Notes for details on the assignment of the lease agreement dated 13 May 2014 and why the Bank did not derecognise the relevant liability.
The rest of payables for finance leases refer to the purchase of motor vehicles by the subsidiary IFIS Finance.
3.1 Debt securities issued: breakdown by type
| 31.12.2016 | 31.12.2015 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Securities | Book | Fair value | Book value |
Fair value | |||||
| value | Level 1 |
Level 2 |
Level 3 |
Level 1 |
Level 2 |
Level 3 |
|||
| A. Securities | |||||||||
| 1. Bonds | 1.487.831 | 83.173 | - | 1.404.609 | - | - | - | - | |
| 1.1 structured bonds | - | - | - | - | - | - | - | - | |
| 1.2 other bonds | 1.487.831 | 83.173 | - | 1.404.609 | - | - | - | - | |
| 2. Other securities | 725 | - | - | 725 | - | - | - | - | |
| 2.1 structured securities | - | - | - | - | - | - | - | - | |
| 2.2 other | 725 | - | - | 725 | - | - | - | - | |
| Total | 1.488.556 | 83.173 | - | 1.405.334 | - | - | - | - |
Debt securities issued included 83,2 million Euro in bond loans and 725 thousand Euro in certificates of deposits issued by Interbanca S.p.a., as well as 1.404,6 million Euro in notes issued by the special purpose vehicles as part of three securitisations launched at the end of 2016. These were consolidated in order to provide a comprehensive view of the transactions.
4.1 Financial liabilities held for trading: breakdown by type
| 31.12.2016 | 31.12.2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Type / Amounts | FV | FV * NV |
FV | |||||||
| NV | Level 1 | Level 2 | Level 3 |
Level 1 | Level 2 |
Level 3 | FV * | |||
| A. Cash liabilities | ||||||||||
| 1. Due to banks | - | - | - | - | - | - | - | - | - | - |
| 2. Due to customers | - | - | - | - | - | - | - | - | - | - |
| 3. Debt securities | - | - | - | - | - | - | - | - | - | |
| 3.1 Bonds | - | - | - | - | - | - | - | - | - | |
| 3.1.1 Structured | - | - | - | - | - | - | - | - | - | X |
| 3.1.2 Other bonds | - | - | - | - | - | - | - | - | - | X |
| 3.2 Other securities | - | - | - | - | - | - | - | - | - | |
| 3.2.1 Structured | - | - | - | - | - | - | - | - | - | X |
| 3.2.2 Other | - | - | - | - | - | - | - | - | - | X |
| Total A | - | - | - | - | - | - | - | - | - | - |
| B. Derivatives | ||||||||||
| 1. Financial derivatives | - | 46.447 | 2.031 | - | - | 21 | ||||
| 1.1 Held for trading | X | - | 46.447 | 2.031 | X | X | - | - | 21 | X |
| 1.2 Connected to the fair value option |
X | - | - | - | X | X | - | - | - | X |
| 1.3 Other | X | - | - | - | X | X | - | - | - | X |
| 2. Credit derivatives | - | - | - | - | - | - | ||||
| 2.1 Held for trading | X | - | - | - | X | X | - | - | - | X |
| 2.2 Connected to the fair value option |
X | - | - | - | X | X | - | - | - | X |
| 2.3 Other | X | - | - | - | X | X | - | - | - | X |
| Total B | - | 46.447 | 2.031 | - | - | 21 | ||||
| Total (A+B) | X | - | 46.447 | 2.031 | X | X | - | - | 21 | X |
Key
FV= fair value FV* = Fair value calculated excluding changes in value due to changes in the issuer's creditworthiness compared to the date of issuance. NV = Nominal or notional value
L1= Level 1
L2= Level 2
L3= Level 3
Concerning level 2 liabilities held for trading, see the comments in section 2 under assets. Level 3 liabilities refer to cross currency swaps with other banks.
See section 14 under assets.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Due to suppliers | 58.878 | 12.334 |
| Due to personnel | 22.105 | 5.088 |
| Due to the Tax Office and Social Security agencies | 17.934 | 4.902 |
| Sums available to customers | 13.375 | 9.077 |
| Accrued expenses and deferred income | 12.082 | 4.665 |
| Other payables | 212.951 | 168.532 |
| Total | 337.325 | 204.598 |
Payables due to personnel included the bonuses for the Top Management, including those for the previous years, subject to deferred payment, as well as payables for unused annual leave.
Other payables included approximately 167 million Euro in amounts due to customers that have not yet been credited and a 9,1 million Euro payable due to one of the buyers of NPL Area receivables. They also included 4,2 million Euro to be paid to the Interbank Deposit Protection Fund as additional contribution for the year 2016.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| A. Opening balance | 1.453 | 1.618 |
| B. Increases | 6.546 | 20 |
| B.1 Allocations for the year | 195 | 20 |
| B.2 Other changes | 57 | - |
| Business combinations | 6.294 | - |
| C. Reductions | 339 | 185 |
| C.1 Payments made | 131 | 150 |
| C.2 Other changes | 208 | 35 |
| D. Closing balance | 7.660 | 1.453 |
| Total | 7.660 | 1.453 |
Payments made represent the benefits paid to employees during the year.
Other decreases include the impact of the discounting of benefits earned up to 31 December 2006 and still held in the company, which, based on the changes introduced by the new IAS 19, are recognised through equity.
Pursuant to the requirements of the ESMA in the document "European common enforcement priorities for 2012 financial statements" of 12 November 2012, the discount rate used was the interest rate based on the market yield of a benchmark of AA-rated European corporate bonds with maturity over 10 years. The same interest rate was used to discount the obligations at 31 December 2015.
Under IASs/IFRSs, a company's liabilities regarding benefits that will be paid to employees at the conclusion of the employer/employee relationship (post-employment benefits) should be recognised based on actuarial calculations of the amount that will be paid at maturity.
Specifically, these allocations must take into account the amount already earned over the period at the reporting date, projecting it into the future in order to calculate the amount that will be paid at the conclusion of the employer/employee relationship. This amount must then be discounted to take into account the time that will pass until payment.
Following the coming into force of the 2007 Budget Law, which brought the reform regarding supplementary pension plans—as per Legislative Decree no. 252 of 5 December 2005—forward to 1 January 2007, the employee was given a choice as to whether to allocate the post-employment benefits earned as from 1 January 2007 to supplementary pension funds or to maintain them in the company, which would then transfer it to a dedicated fund managed by INPS (the Italian National Social Security Institute).
This reform has led to changes in the accounting of such benefits as for both the benefits earned up to 31 December 2006 and those earned from 1 January 2007.
In particular:
benefits earned as from 1 January 2007 constitute a defined-contribution plan, regardless of whether the employee has chosen to allocate them to a supplementary pension fund or to INPS's Treasury Fund. Those benefits shall be calculated according to contributions due without applying actuarial methods;
benefits earned up to 31 December 2006 continue to be considered as a defined-benefit plan, and as such are calculated on an actuarial basis which, however, unlike the calculation method applied until 31 December 2006, no longer requires that the benefits be proportionally attributed to the period of service rendered: the employee's service is considered entirely accrued due to the change in the accounting nature of benefits earned as from 1 January 2007.
| Items/Components | 31.12.2016 | 31.12.2015 |
|---|---|---|
| 1 Provisions for pensions | - | - |
| 2. Other provisions for risks and charges | 24.318 | 2.171 |
| 2.1 legal disputes | 9.577 | 1.513 |
| 2.2 personnel expenses: | 3.687 | - |
| 2.3 other | 11.054 | 658 |
| Total | 24.318 | 2.171 |
| 31.12.2016 | ||
|---|---|---|
| Items/Components | Pensions and post retirement benefit obligations |
Other provisions |
| A. Opening balance | - | 2.171 |
| B. Increases | - | 24.321 |
| B.1 Provisions for the year | - | 2.385 |
| B.2 Changes due to the passage of time | - | - |
| B.3 Differences due to discount-rate changes | - | - |
| B.4 Other changes | - | - |
| Business combinations | - | 21.936 |
| C. Reductions | - | 2.174 |
| C.1 Used during the year | - | 808 |
| C.2 Differences due to discount-rate changes | - | - |
| C.3 Other changes | - | 1.366 |
| D. Closing balance | - | 24.318 |
Here below is the breakdown of the provision for risks and charges at the end of the year by type of dispute compared with the prior year. For the sake of clarity, the provisions deriving from the acquisition of the former GE Capital Interbanca Group are reported separately.
The provision outstanding at 31 December 2016, amounting to 1,9 million Euro, included 1,8 million Euro for 17 disputes concerning the Trade Receivables segment (the plaintiffs seek 18,0 million Euro in damages), and 100 thousand Euro for 8 disputes concerning the NPL Area segment.
The provision outstanding at 31 December 2016, amounting to 7,7 million Euro, included 250 thousand Euro for a dispute involving IFIS Factoring (the plaintiffs seek 500 thousand Euro in damages), 2,0 million Euro for 26 disputes concerning IFIS Leasing (the plaintiffs seek 4,3 million Euro in damages), and 5,5 million Euro for 7 disputes involving Interbanca (the plaintiffs seek 50,6 million Euro in damages).
The provision for risks at the end of 2015, amounting to 197 thousand Euro, referred to the amount set aside for the verification notices received by the Bank, which had filed an appeal against them with the competent Tax Commission. In July 2016, the Bank reached a full and final settlement with the Italian Revenue Agency, and subsequently paid the agreed amount to settle the above verification notices.
The provision at 31 December 2016 included 2,5 million Euro in the amount set aside for commissions paid in early 2017 in order to buy back the senior tranche of the leasing securitisation (eligible securities).
The provision outstanding at 31 December 2015 referred to the amount set aside as per the request of Italy's Interbank Deposit Protection Fund (FITD, Fondo Interbancario di Tutela dei Depositi), of which Banca IFIS is a member. In a letter dated 16 September 2014, the FITD approved another rescue loan (in addition to the measures announced on 9 January 2014 and 17 July 2014) to Banca Tercas, placed under Special Administration. The relevant potential obligation for Banca IFIS amounted to 0,5 million Euro. Therefore, in 2014 Banca IFIS allocated said amount to the provisions for risks and charges. Since the underlying commitments have expired, the Bank has recognised the amount previously set aside through profit or loss.
The provision outstanding at 31 December 2016, amounting to 12,3 million Euro, included 3,7 million Euro in personnel-related expenses and 8,6 million Euro in other provisions, including 3,5 million Euro for customer allowances and 3,8 million Euro as provision for risks on unfunded commitments.
Here below are the most significant contingent liabilities outstanding at 31 December 2016. Based on the opinion of the legal advisers assisting the subsidiaries, they are considered possible, and therefore they are only disclosed.
For the sake of clarity, the contingent liabilities deriving from the acquisition of the former GE Capital Interbanca Group are reported separately.
Banca IFIS recognises contingent liabilities amounting to 7,4 million Euro in claims, represented by 12 disputes: 6 refer to disputes concerning the Trade Receivables segment, for a total of 7,2 million Euro, 2 to labour disputes, for 167 thousand Euro, and 4 to the NPL Area segment, for 71 thousand Euro. Banca IFIS, supported by the legal opinion of its lawyers, made no provisions for these positions, as the risk of defeat is considered possible.
Here below are the most significant contingent liabilities of the former GE Capital Interbanca Group.
A lawsuit was filed against Interbanca in 2010 concerning a position for which the company had entered into a settlement agreement with the Receiver appointed at the time for the extraordinary administration proceedings involving a debtor of Interbanca. The new Receiver questioned the validity of the agreement, seeking 168 million Euro in damages from Interbanca, among others.
During the dispute, some defendants made various demands to Interbanca, asking that the company indemnifies them against the claims made by the plaintiff or to benefit from the settlement agreement entered into between Interbanca and the then Receiver.
The Court deemed the settlement agreement valid and enforceable, dismissing all claims of the Plaintiffs and the request the other defendants made to Interbanca.
The Court did not rule on the requests submitted by two defendants that Interbanca indemnifies them, and therefore not even on the objections raised by the company, separately ordering the proceeding involving also Interbanca to continue. As part of the first-instance trial, which is still pending, the courtappointed expert witness recently filed his report, concluding that the three debtors have no right to seek damages from the defendants. The plaintiffs objected to the decision and asked for another expert witness to prepare a new report or complement the one already filed. The Court has adjourned the case. The plaintiffs have appealed against the part of the first-instance ruling considering the settlement agreement valid and enforceable, reducing the damages they claim to approximately 149 million Euro. In the ruling issued on 10 March 2017, the Appeals Court dismissed the appeal, upholding the firstinstance ruling and awarding costs against the plaintiffs. As mentioned, the risk assessment also accounts for the opinions of external lawyers as well as the positive indications from the first- and secondinstance rulings. As mentioned, the risk assessment also accounts for the opinions of external lawyers as well as the positive indications from the first- and second-instance rulings.
In early 2017, the officials of an extraordinary administration proceeding involving a chemical company in which Interbanca indirectly held a stake between 1999 and 2004 filed a lawsuit for damages.
The lawsuit was filed against Interbanca and 60 other defendants—corporations and individuals, including two former employees and one former director of Interbanca, which were held harmless by the latter—to ascertain their alleged joint responsibility and sentence them to pay for the damages allegedly caused to the company in extraordinary administration, initially estimated to be at least 388 million Euro.
The plaintiff alleged that the direct and indirect owners of the company in extraordinary administration, including Interbanca as well the former directors and statutory auditors of the company in extraordinary administration, had engaged in unlawful conduct. According to the plaintiff, the damages were caused by a spin-off launched by the company after it was placed into extraordinary administration, to the detriment of the company itself and its creditors.
In 2013, the receiver sought approximately 3,5 billion Euro in damages from the defendants, including Interbanca, for alleged environmental damage caused by the operation of chemical production plants owned by the company in extraordinary administration and its subsidiaries. Italy's Ministry of the Environment and the Protection of the Territory and the Sea as well as the Ministry of Economy and Finance voluntarily joined the proceedings to support the plaintiff's claims.
The dispute was resolved—at least as far as most defendants, including Interbanca and its two former employees and its former director, are concerned—with the ruling issued on 10 February 2016, The Court dismissed the request to join the proceedings filed by Italy's Ministry of the Environment and the Protection of the Territory and the Sea as well as the Ministry of Economy and Finance as inadmissible, dismissed all claims for damages filed by the plaintiff against, among others, Interbanca, its former employees and its former director, and awarded costs against the plaintiff and the Ministries.
In March 2016, both the Ministries and the plaintiff filed an appeal against the ruling, and the hearings were scheduled for 19 July 2016 and 4 October 2016, respectively. At the first hearing on the appeal
filed by the Ministries, the Court adjourned the case to the 4 October 2016 hearing on the appeal filed by the plaintiff, combining the two proceedings.
In November 2016, Interbanca, the two former employees and the managing director involved entered into separate settlement agreements with the plaintiff, which withdrew the claims against Interbanca and the three individuals. In turn, these waived the costs awarded to them in the first-instance ruling.
To settle the pending appeal proceedings, the parties formally exchanged their waivers, and at the hearing on 21 February 2017, the plaintiff's attorney announced the finalisation of the settlement agreement with the Bank and the three mentioned individuals, filing the respective waivers. The Court adjourned the case to 16 June 2017 to ascertain the performance of all settlement agreements between the plaintiff and the defendants. Meanwhile, the appeal filed by the Ministries is still pending.
On 28 July 2015, the Ministry of the Environment and the Protection of the Territory and the Sea served Interbanca with an order requiring it and the other recipients effective immediately to take all actions necessary to control, limit, remove or otherwise manage any factor that could potentially cause damage at the three industrial plants operated by the company in extraordinary administration that had filed the lawsuit described above. Interbanca appealed against the order with the competent Administrative Court, asking for its suspension.
On 21 March 2016, the Regional Administrative Court issued its ruling, upholding Interbanca's appeal and cancelling the order. On 15 July 2016, the Ministry of the Environment and the Protection of the Territory and the Sea appealed against the decision. The Ministry also filed an appeal with the Italian Council of State against the rulings issued in the proceedings brought by all the other recipients of the order of the Ministry of the Environment and the Protection of the Territory and the Sea dated 24 July 2015. A hearing has not yet been scheduled.
In early August 2016, Interbanca was served with a notice of arbitration at the National and International Arbitration Chamber of Milan by a company owning a controlling interest in a IT services company in which Interbanca owns a non-controlling interest.
The dispute specifically concerns the validity and enforceability of Interbanca's exit from the investment, especially with reference to the put option the plaintiff granted to Interbanca under the agreements between the parties. Interbanca exercised the put option in accordance with the provisions of the agreements in force before the commencement of the arbitration. To date, the plaintiff has not yet estimated the alleged damages, asking the Arbitration Board to assess or liquidate them during the proceeding including through an equitable remedy.
The contingent liabilities deriving from the verification notices for the fiscal years 2004 and 2005 were written off after reaching a settlement with the tax authorities on 13 June 2016. Under the settlement agreement, Banca IFIS paid 1,8 million Euro (including 1,1 million Euro in taxes, 388 thousand Euro in penalties, and 351 thousand Euro in interest).
On 23 December 2016, Banca IFIS received a VAT verification notice totalling 105 thousand Euro, without assessing any penalties and interest. Banca IFIS, supported by its tax advisers, decided to file an appeal and considered the risk of defeat possible, but not probable: therefore, it did not allocate funds to the provision for risks and charges.
Dispute concerning withholding taxes on interest paid in Hungary
Companies involved: Interbanca Spa and IFIS Leasing Spa (including the merged GE Leasing Italia Spa)
The Italian Revenue Agency contested the failure to pay the 27% withholding tax on the interest paid to the Hungarian financial company of the GE group without any withholding tax pursuant to the International Convention between Italy and Hungary for the avoidance of double taxation. The Italian Revenue Agency determined that the Hungarian entity was not the actual beneficiary of the interest paid by the Italian firms, but only a conduit company.
According to the Italian Revenue Agency, the beneficiary is a company allegedly incorporated in Bermuda, therefore the International Convention between Italy and Hungary for the avoidance of double taxation does not apply. Entities in tax havens are subject to a 27% withholding tax.
Therefore, for the years between 2007 and 2011, the Italian Revenue Agency assessed approximately 68 and 42 million Euro in additional withholding taxes against Interbanca Spa and IFIS Leasing Spa, respectively, as well as administrative penalties amounting to 150/250%.
The Companies involved filed an appeal against the verification notices pursuant to the law with the competent Tax Commissions, paying 1/3 of the tax, i.e. nearly 25 million Euro, as provisional enrolment on the tax register.
Following the exchange of information pursuant to Council Directive EU/2011/16, Hungary's tax authority concluded that the GE group's Hungarian company must be legitimately considered the beneficiary of the interest received from the Italian counterparties".
So far, all rulings issued by the competent Provincial Tax Commissions (Turin and Milan) have fully upheld the appeals. As expected, the Italian Revenue Agency has appealed against these decisions.
The Italian Revenue Agency has reclassified the write-off of receivables made by the Company in 2004, 2005, 2006 and 2007 and added in the years between 2005 and 2011 to losses on receivables—without any actual evidence.
For the years 2004/2011, the Agency assessed 755 thousand Euro in additional taxes and administrative penalties amounting to 100%.
The Italian Revenue Agency challenged the failure to apply the pro-rata mechanism in the years between 2007 and 2010 concerning the VAT deduction for passive transactions in exchange for VATexempt commissions received from insurance companies for insurance mediation activities that are ancillary to the core vehicle leasing business (which is subject to VAT).
For the years 2007/2010, the Agency assessed 3 million Euro in additional VAT and administrative penalties amounting to 125%.
In line with market practice, under the purchase agreement for the former GE Capital Interbanca Group, the seller (GE Capital International Limited) made a series of representations and warranties related to Interbanca and other Investees. Similarly, the agreement also contains a limited series of representations and warranties made by Banca IFIS, which concern mostly its ability to finalise the acquisition. In addition, the agreement includes a series of special reimbursements paid by the seller related to the main legal and tax disputes involving the former GE Capital Interbanca Group companies.
For more details, see Section G in the Notes.
Section 15 – Equity attributable to owners of the parent company – Items 140, 160, 170, 180, 190, 200 and 220
| Item | 31.12.2016 | 31.12.2015 | |
|---|---|---|---|
| 190 | Share capital (in thousands of Euro) | 53.811 | 53.811 |
| Number of ordinary shares | 53.811.095 | 53.811.095 | |
| Nominal amount of ordinary shares | 1 Euro | 1 Euro | |
| 200 | Treasury shares (in thousands of Euro) | 3.187 | 5.805 |
| Number of treasury shares | 380.151 | 739.446 |
| Headings/Types | Ordinary | Others |
|---|---|---|
| A. Shares held at the beginning of the year | 53.811.095 | - |
| - fully paid-up | 53.811.095 | - |
| - not fully paid-up | - | - |
| A.1 Treasury shares (-) | 739.446 | - |
| A.2 Outstanding shares: opening balance | 53.071.649 | - |
| B. Increases | 359.295 | - |
| B.1 New issues | - | - |
| - paid: | - | - |
| - business combinations | - | - |
| - conversion of bonds | - | - |
| - exercise of warrants | - | - |
| - other | - | - |
| - free: | - | - |
| - in favour of employees | - | - |
| - in favour of directors | - | - |
| - other | - | - |
| B.2 Sale of treasury shares | 350.000 | - |
| B.3 Other changes | 9.295 | - |
| C. Reductions | - | - |
| C.1 Annulments | - | - |
| C.2 Buybacks of treasury shares | - | - |
| C.3 Company sell-offs | - | - |
| C.4 Other changes | - | - |
| D. Outstanding shares: closing balance | 53.430.944 | - |
| D.1 Treasury shares (+) | 380.151 | - |
| D.2 Shares held at the end of the year | 53.811.095 | - |
| - fully paid-up | 53.811.095 | - |
| - not fully paid-up | - | - |
The share capital is composed of 53.811.095 ordinary shares with a nominal value of 1 Euro each, bearing no rights, liens and obligations, including those relating to dividend distribution and capital redemption.
| Items/Components | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Legal reserve | 10.762 | 10.762 |
| Extraordinary reserve | 357.955 | 237.553 |
| Other reserves | 9.685 | 8.463 |
| Total income-related reserves | 378.402 | 256.778 |
| Buyback reserve | 3.187 | 5.805 |
| Future buyback reserve | - | 34.195 |
| Other reserves | 2.246 | 2.078 |
| Total item 170 reserves | 383.835 | 298.856 |
Pursuant to art. 1, paragraph 145 of the 2014 Budget law (Law no. 147 of 27 December 2013), the Bank realigned the difference between the tax base and carrying amount of property, plant and equipment recognised at 31 December 2012 and still held at 31 December 2013.
The amount corresponding to the higher values following the realignment, net of the substitute tax, generated a 7,4 million Euro untaxed reserve.
| Operations | 31.12.2016 | 31.12.2015 |
|---|---|---|
| 1) Financial guarantees | 191.585 | 131.293 |
| a) Banks | 11 | - |
| b) Customers | 191.574 | 131.293 |
| 2) Commercial guarantees | - | - |
| a) Banks | - | - |
| b) Customers | - | - |
| 3) Irrevocable commitment to grant funds | 225.585 | 65.855 |
| a) Banks | - | 3.674 |
| i) certain use | - | 3.674 |
| ii) uncertain use | - | - |
| b) Customers | 225.585 | 62.181 |
| i) certain use | 77.883 | 13.766 |
| ii) uncertain use | 147.702 | 48.415 |
| 4) Commitments underlying credit derivatives: sale of protection | - | - |
| 5) Assets used as collateral by third parties | - | - |
| 6) Other commitments | 145.290 | 91.296 |
| Total | 562.460 | 288.444 |
Financial guarantees granted to customers essentially refer to guarantees granted in favour of invoice sellers for collected tax receivables.
Other commitments refer to unused bank overdraft facilities on customers' current accounts.
| Portfolios | 31.12.2016 | 31.12.2015 |
|---|---|---|
| 1. Financial assets held for trading | - | - |
| 2. Financial assets at fair value | - | - |
| 3. Available for sale financial assets | 30.117 | - |
| 4. Held to maturity financial assets | - | - |
| 5. Due from banks | - | - |
| 6. Loans to customers | - | - |
| 7. Property, plant and equipment | - | - |
Available for sale financial assets refer to government bonds used as collateral with the Bank of Italy.
| Type of services | Amounts |
|---|---|
| 1. Execution of orders on behalf of clients | - |
| a) purchases | - |
| 1. settled | - |
| 2. unsettled | - |
| b) sales | - |
| 1. settled | - |
| 2. unsettled | - |
| 2. Portfolio management: | - |
| a) individual | - |
| b) collective | - |
| 3. Safekeeping and administration of securities | 1.431.736 |
| a) third party securities in custody: associated with depositary bank | - |
| services (excluding portfolio management) | |
| 1. securities issued by consolidated companies | - |
| 2. other securities | - |
| b) other third party securities in custody (excluding portfolio management): other | 1.037.645 |
| 1. securities issued by consolidated companies | 217.321 |
| 2. other securities | 820.324 |
| c) third party securities held with third parties | 1.037.645 |
| d) own securities held with third parties | 394.091 |
| 4. Other transactions | - |
The subsidiary Interbanca provides safe custody and management of securities.
Section 1 – Interest - Items 10 and 20
| Items/Types | Debt securi ties |
Loans | Other transactions |
31.12.2016 | 31.12.2015 | |
|---|---|---|---|---|---|---|
| 1 | Financial assets held for trading | - | - | - | - | - |
| 2 | Financial assets at fair value | - | - | - | - | - |
| 3 | Available for sale financial assets | 11.083 | - | - | 11.083 | 43.991 |
| 4 | Held to maturity financial assets | - | - | - | - | 22.110 |
| 5 | Due from banks | - | 35 | 428 | 463 | 444 |
| 6 | Loans to customers | 27 | 100.754 | 213.018 | 313.799 | 183.550 |
| 7 | Hedging derivatives | X | X | - | - | - |
| 8 | Other assets | X | X | 93 | 93 | 115 |
| Total | 11.110 | 100.789 | 213.539 | 325.438 | 250.210 |
The decline in interest on financial assets compared to 2015 was essentially the result of the reduction in interest income from the debt securities portfolio—largely because of the rebalancing completed in April 2015 as well as the downsizing of the portfolio itself.
The subline item Loans to customers, Other transactions, include the 15,8 million Euro positive effect of the implementation of the new model to estimate the cash flows of health service receivables. This was recognised under interest income and commented on in the introductory notes on how to read the data of the Directors' Report and Part A of these Notes. It also included 3,1 million Euro in positive interest expense attributable to the decline in funding rates.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Interest income on foreign currency financial assets | 10.324 | 1.950 |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Interest income on finance leases | 3.039 | - |
| Items/Types | Payables | Securities | Other transactions |
31.12.2016 | 31.12.2015 | |
|---|---|---|---|---|---|---|
| 1 | Due to Central banks | (22) | X | (1.879) | (1.901) | (303) |
| 2 | Due to banks | (1.467) | X | - | (1.467) | (325) |
| 3 | Due to customers | (50.124) | X | (4) | (50.128) | (40.936) |
| 4 | Outstanding securities | X | (3.439) | - | (3.439) | - |
| 5 | Financial liabilities held for trading | - | - | - | - | - |
| 6 | Financial liabilities at fair value | - | - | - | - | - |
| 7 | Other liabilities and provisions | X | X | (320) | (320) | (20) |
| 8 | Hedging derivatives | X | X | - | - | - |
| Total | (51.613) | (3.439) | (2.203) | (57.255) | (41.584) |
Interest expense on outstanding securities included 3,0 million Euro in funding costs for the securitisations carried out in late 2016, as detailed in Part E of these Notes.
Interest expense on payables due to customers related to the "payables" category at 31 December 2016 referred for 49,1 million Euro to the rendimax savings account, up from 39,8 million Euro at 31 December 2015, as a result of the newly introduced 3-, 4- and 5-year maturities as well as some promotional campaigns aiming to boost funding levels ahead of the finalisation of the former GE Capital Interbanca Group acquisition.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Interest expense on foreign currency liabilities | (293) | (183) |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Interest expense on liabilities for finance leases | (64) | (141) |
| Service type/Amounts | 31.12.2016 | 31.12.2015 |
|---|---|---|
| a) guarantees granted | 38 | 102 |
| b) derivatives on loans | - | - |
| c) management. brokerage and consultancy services: | 558 | - |
| 1. trading in financial instruments | - | - |
| 2. trading in currencies | - | - |
| 3. asset management | 359 | - |
| 3.1. individual | 359 | - |
| 3.2. collective | - | - |
| 4. safe custody and management of securities | - | - |
| 5. depository bank | - | - |
| 6. placement of securities | - | - |
| 7. order collection and transmission | - | - |
| 8. consultancy | - | - |
| 8.1 on investments | - | - |
| 8.1 on financial structure | - | - |
| 9. third-party services | 199 | - |
| 9.1. asset management | - | - |
| - 9.1.1. individual |
- | - |
| - 9.1.2. collective |
- | - |
| 9.2. insurance products | 199 | - |
| 9.3. Other products | - | - |
| d) collection and payment services | 987 | 2.101 |
| e) servicing for securitisation transactions | 165 | - |
| f) services for factoring transactions | 53.565 | 57.738 |
| g) tax collection and payment | - | - |
| h) management of multi-lateral trading systems | - | - |
| i) current account holding and management | 1.129 | 1.120 |
| j) other services | 2.964 | 2.113 |
| Totale | 59.406 | 63.174 |
| Services/Amounts | 31.12.2016 | 31.12.2015 |
|---|---|---|
| a) guarantees received | (202) | (183) |
| b) derivatives on loans | - | - |
| c) management, brokerage and consultancy services: | (96) | (75) |
| 1. trading in financial instruments | - | - |
| 2. trading in currencies | - | - |
| 3. asset management: | - | - |
| 3.1 own assets | - | - |
| 3.2 delegated by third parties | - | - |
| 4. safe custody and management of securities | (96) | (75) |
| 5. placement of financial instruments | - | - |
| 6. off-site offer of financial instruments, services and products | - | - |
| d) collection and payment services | (2.956) | (2.480) |
| e) other services | (15.041) | (1.653) |
| Total | (18.295) | (4.391) |
Other services included 12,5 million Euro in up-front commissions for the factoring, leasing and lending securitisations carried out in December 2016, as described in Part E of these Notes; in addition, this line item referred to commissions from approved banks' mediation activities, the work of other credit intermediaries, and commissions paid to correspondent banks and factors.
4.1 Net profit (loss) from trading: breakdown
| Items / Returns | Capital gains (A) |
Profit from trading (B) |
Capital losses (C) |
Losses from trading (D) |
Net result [(A+B) - (C+D)] |
|---|---|---|---|---|---|
| 1. Financial assets held for trading | - | - | - | - | - |
| 1.1 Debt securities | - | - | - | - | - |
| 1.2 Equity instruments | - | - | - | - | - |
| 1.3 UCITS units | - | - | - | - | - |
| 1.4 Loans | - | - | - | - | - |
| 1.5 Other | - | - | - | - | - |
| 2. Financial liabilities held for trading | - | - | - | - | - |
| 2.1 Debt securities | - | - | - | - | - |
| 2.2 Payables | - | - | - | - | - |
| 2.3 Other | - | - | - | - | - |
| 3. Other financial assets and liabilities: exchange differences |
X | X | X | X | (510) |
| 4. Derivative instruments | 1.394 | 729 | (959) | (1.356) | (192) |
| 4.1 Financial derivatives: | 1.394 | 729 | (959) | (1.356) | (192) |
| - On debt securities and interest rates | 1.394 | 729 | (959) | (1.356) | (192) |
| - On equity instruments and share indexes | - | - | - | - | - |
| - On currencies and gold | X | X | X | X | - |
| - Other | - | - | - | - | - |
| 4.2 Credit derivatives | - | - | - | - | - |
| Totale | 1.394 | 729 | (959) | (1.356) | (702) |
6.1 Profit (loss) from sale or buyback: breakdown
| 31.12.2016 | 31.12.2015 | |||||
|---|---|---|---|---|---|---|
| Items/Returns | Profit | Losses | Net result | Profit | Losses | Net result |
| Financial assets | ||||||
| 1. Due from banks | - | - | - | - | - | - |
| 2. Loans to customers | 44.809 | (280) | 44.529 | 14.948 | - | 14.948 |
| 3. Available for sale financial assets |
8.643 | (3.165) | 5.478 | 126.384 | (705) | 125.679 |
| 3.1 Debt securities | 8.643 | (3.165) | 5.478 | 126.346 | (705) | 125.641 |
| 3.2 Equity instruments | - | - | - | 38 | - | 38 |
| 3.3 UCITS units | - | - | - | - | - | - |
| 3.4 Loans | - | - | - | - | - | - |
| 4. Held to maturity financial assets |
- | - | - | - | - | - |
| Total assets | 53.452 | (3.445) | 50.007 | 141.332 | (705) | 140.627 |
| Financial liabilities | ||||||
| 1. Due to banks | - | - | - | - | - | - |
| 2. Due to customers | - | - | - | - | - | - |
| 3. Debt securities issued | - | - | - | - | - | - |
| Total liabilities | - | - | - | - | - | - |
The gains on the sale of loans to customers were achieved by selling portfolios of receivables of the NPL Area segment, as commented under Contribution of business segments in the Directors' Report.
The gains on the sale of debt securities of the previous year included 124,0 million Euro in gains from the rebalancing of the government bond portfolio; the Group sold additional government bonds in 2016, realising a 5,5 million Euro gain.
8.1 Net impairment losses on receivables: breakdown
| Impairment losses (1) |
Reversals of impairment losses (2) |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Specific | Specific | ||||||||
| Items/ returns |
Write-offs | Others | Portfolio | Portfolio | |||||
| A | B A |
B | |||||||
| A. Due from banks | - | - | - | - | - | - | - | - | - |
| - loans | - | - | - | - | - | - | - | - | - |
| - debt securities | - | - | - | - | - | - | - | - | - |
| B. Loans to customers | (38.620) | (35.938) | (1.250) | 2.471 | 13.015 | 1.179 | 4.261 | (54.882) | (25.273) |
| Acquired non-performing loans |
(34.158) | (200) | - | - | - | - | - | (34.358) | (3.613) |
| - loans | (34.158) | (200) | X | - | - | X | X | (34.358) | (3.613) |
| - debt securities | - | - | X | - | - | X | X | - | - |
| Other receivables | (4.462) | (35.738) | (1.250) | 2.471 | 13.015 | 1.179 | 4.261 | (20.524) | (21.660) |
| - loans | (4.462) | (35.738) | (1.250) | 2.471 | 13.015 | 1.179 | 4.261 | (20.524) | (21.660) |
| - debt securities | - | - | - | - | - | - | - | - | - |
| C. Total | (38.620) | (35.938) | (1.250) | 2.471 | 13.015 | 1.179 | 4.261 | (54.882) | (25.273) |
Key
A= from interest B= other reversals
Net impairment losses on receivables referred for 20,3 million Euro to Trade Receivables, 32,6 million Euro to the NPL Area,1,5 million Euro to the Leasing sector, and 0,4 million Euro to Tax Receivables. As for net value adjustments on NPL receivables, they referred to positions for which trigger events occurred, causing the position to become impaired under the adopted measurement model and the relevant accounting policy, as detailed in Contribution of business segments in the Directors' Report.
The impairment losses and reversals include the 'time value' effect deriving from the process of discounting expected future cash flows.
| Items/ Returns |
Impairment losses (1) Specific |
Reversals of impairment losses (2) Specific |
Total 31.12.2016 |
Total 31.12.2015 |
||
|---|---|---|---|---|---|---|
| Write-offs | Others | A | B | |||
| A. Debt securities | - | - | - | - | - | - |
| B. Equity instruments | - | (4.356) | X | X | (4.356) | (8.977) |
| C. UCITS units | - | - | X | - | - | - |
| D. Loans to banks | - | - | - | - | - | - |
| E. Loans to customers | - | - | - | - | - | - |
| F. Total | - | (4.356) | - | - | (4.356) | (8.977) |
Key
A= from interest
B= other reversals
Net impairment losses on available for sale financial assets referred to impairment losses recognised on unlisted equity instruments that were found to be impaired.
| Impairment losses | Reversals | Total | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Items / Returns | Specific | 31.12.2016 | 31.12.2015 | ||||||
| Write | Others | Portfo lio |
Specific | Portfolio | |||||
| offs | A | B | A | B | |||||
| A. Guarantees granted | - | - | - | - | - | - | 5 | 5 | - |
| B. Credit derivatives | - | - | - | - | - | - | - | - | - |
| C. Loan commitments | - | - | - | - | - | - | - | - | - |
| D. Other transactions | - | - | - | - | - | - | - | - | - |
| E. Total | - | - | - | - | - | - | 5 | 5 | - |
Key
A= from interest
B= other reversals
| Type of expense/Sectors | 31.12.2016 | 31.12.2015 |
|---|---|---|
| 1) Employees | (61.880) | (44.656) |
| a) salaries and wages | (41.144) | (32.587) |
| b) social security contributions | (11.313) | (9.239) |
| c) post-employment benefits | (2.047) | (1.680) |
| d) pension expense | (9) | - |
| e) allocations for post-employment benefits | (195) | (20) |
| f) allocations to pensions and similar provisions: | - | - |
| - defined contribution plans | - | - |
| - defined benefit plans | - | - |
| g) payments made to supplementary external funds: | (48) | - |
| - defined contribution plans | (48) | - |
| - defined benefit plans | - | - |
| h) costs arising from share-based payment agreements | - | - |
| i) other employee benefits | (7.124) | (1.130) |
| 2) Other serving employees | (123) | (120) |
| 3) Directors and Statutory Auditors | (3.993) | (3.566) |
| 4) Retired personnel | - | - |
| 5) Reimbursements of seconded staff expenses | 127 | - |
| 6) Reimbursements of third-party seconded staff expenses | (9) | - |
| Total | (65.878) | (48.342) |
Personnel expenses rose 36,3% and included 5,5 million Euro in costs deriving from the agreements with some top executives of the GE Capital Interbanca Group attributable to the previous management.
Post-employment benefits include both contributions that employees have chosen to leave in the company and to be paid to INPS's Treasury Fund, and contributions to be paid to supplementary pension funds. Allocations for post-employment benefits refer to the revaluation of post-employment benefits earned up to 31 December 2006 and left in the company.
Besides the mentioned 5,5 million Euro in costs, other employee benefits included expenses incurred for training and refresher courses.
| Employees: | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Employees: | 1.023,5 | 671,0 |
| (a) senior managers | 43,5 | 24,0 |
| (b) middle managers | 275,0 | 51,5 |
| (c) remaining personnel | 705,0 | 595,5 |
| Other personnel | - | - |
| Type of expense/Amounts | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Expenses for professional services | (56.995) | (31.044) |
| Legal and consulting services | (25.511) | (13.948) |
| Auditing | (428) | (226) |
| Outsourced services | (31.056) | (16.870) |
| Direct and indirect taxes | (14.882) | (8.748) |
| Expenses for purchasing goods and other services | (54.399) | (39.036) |
| Customer information | (11.376) | (6.793) |
| Software assistance and hire | (5.550) | (3.267) |
| Postage of documents | (5.254) | (3.632) |
| Property expenses | (4.667) | (4.585) |
| Advertising and inserts | (3.769) | (2.150) |
| Car fleet management and maintenance | (2.407) | (2.264) |
| Telephone and data transmission expenses | (1.923) | (1.441) |
| Employee travel | (1.665) | (1.120) |
| Other sundry expenses | (17.788) | (13.784) |
| Total administrative expenses | (126.276) | (78.828) |
Other administrative expenses were up 60,2% because of the costs incurred for the acquisition of the former GE Capital Interbanca Group (9,5 million Euro in legal and consulting fees) and the higher business volumes in the NPL Area. The relevant costs for collecting debts and gathering information on clients (29,4 and 9,4 million Euro, compared to 15,4 and 5,3 million Euro at 31 December 2015, respectively), are included in this item of the income statement. The cost of gathering information on clients specifically concern master data and employment information search costs, which are necessary to reclassify the positions being processed.
| Type of services | Service provider | Beneficiary | Fees (units of Euro) |
|---|---|---|---|
| Banca IFIS S.p.A. | 161.925 | ||
| Independent auditors' fees | EY S.p.A. | Subsidiaries | 153.523 |
| Banca IFIS S.p.A. | |||
| Certification services | EY S.p.A | Subsidiaries | - |
| Banca IFIS S.p.A. | - | ||
| Tax consultancy services | EY S.p.A | Subsidiaries | - |
| Banca IFIS S.p.A. | 20.000 | ||
| Other services | EY S.p.A | Subsidiaries | 1.183 |
| Total | 336.631 |
Section 12 – Net allocations to provisions for risks and charges – Item 190
12.1. Net allocations to provisions for risks and charges: breakdown
| Type of expense/Amounts | 31.12.2016 | 31.12.2015 |
|---|---|---|
| - Net allocations to the provision for risks and charges for legal disputes | 33 | (32) |
| - Net allocations to the provision for risks and charges for tax dispute | 133 | (197) |
| - Net allocations to the provision for sundry risks and charges | (2.015) | - |
| Total | (1.849) | (229) |
Provisions for legal disputes refer for 275 thousand Euro to Trade Receivables and 68 thousand Euro to the NPL Area, net of reversals amounting to 141 thousand Euro following the settlement of a dispute involving Interbanca and 235 thousand Euro for an excess provision related to the Leasing sector.
Allocations to other provisions included 2,5 million Euro in commissions to be paid in early 2017 in order to buy back the senior tranche of the securitisation activated by the subsidiary IFIS Leasing (eligible securities), net of 461 thousand Euro in reversals related to an allocation made in previous years to Italy's Interbank Deposit Protection Fund.
In addition, the Group recognised 133 thousand Euro in reversals following the settlement of a tax dispute.
For more details, see Part B, Section 12 Provisions for risks and charges in these Notes.
Section 13 – Net impairment losses/reversals on property, plant and equipment – Item 200
| Income items | Depreciation (a) | Impairment losses (b) |
Reversals of im pairment losses (c) |
Net result (a + b - c) |
|
|---|---|---|---|---|---|
| A. | Property, plant and equipment | ||||
| A.1 Owned | (2.480) | - | - | (2.480) | |
| - for functional use | (2.480) | - | - | (2.480) | |
| - for investment purposes | - | - | - | - | |
| A.2 Acquired under finance leases | (5) | - | - | (5) | |
| - for functional use | (5) | - | - | (5) | |
| - for investment purposes | - | - | - | - | |
| Total | (2.485) | - | - | (2.485) |
| Income items | Depreciation (a) | Impairment losses (b) |
Reversals of im pairment losses (c) |
Net result (a + b - c) |
|
|---|---|---|---|---|---|
| A. | Intangible assets | ||||
| A.1 Owned | (3.561) | - | - | (3.561) | |
| - Internally generated | (21) | - | - | (21) | |
| - Other | (3.540) | - | - | (3.540) | |
| A.2 Acquired under finance leases | (9) | - | - | (9) | |
| Total | (3.570) | - | - | (3.570) |
| Type of expense/Amounts | 31/12/2016 | 31/12/2015 |
|---|---|---|
| a) Transactions with customers | (3.616) | (14) |
| b) Capital losses | (317) | - |
| c) Other expenses | (4.271) | (265) |
| Total | (8.204) | (279) |
Transactions with customers included 2,8 million Euro in expenses incurred for a legal dispute involving the trade receivables segment. Other expenses included 1,5 million Euro in contractual penalties following the termination of two service contracts.
| Type of expense/Amounts | 31/12/2016 | 31/12/2015 |
|---|---|---|
| a) Bargain on interest acquisition | 623.635 | - |
| a) Recovery of expenses charged to third parties | 2.591 | 2.999 |
| c) Receivable rental fees | 86 | 64 |
| d) Other income; | 3.110 | 242 |
| Total | 629.422 | 3.305 |
Other operating income, totalling 629,4 million Euro (3,3 million Euro at 31 December 2015), included the 623,6 million Euro gain on bargain purchase from the acquisition of the former GE Capital Interbanca Group, as detailed in Part G of these Notes.
The item "Recovery of expenses charged to third parties" refers to charges on customers for legal and consulting expenses, as well as registration fees and stamp duties recognised under the item "Other administrative expenses".
| Income components/Sectors | 31.12.2016 | 31.12.2015 | |
|---|---|---|---|
| 1. | Current tax expense (-) | (35.306) | (80.121) |
| 2. | Changes in current taxes of previous years (+/-) | (2.227) | (242) |
| 3. | Reductions in current taxes for the year (+) | 343 | - |
| 3.bis | Reductions in current taxes for the year for tax credits as per Italian Law no. 214/2011 (+) |
- | - |
| 4. | Changes in deferred tax assets (+/-) | 2.763 | 952 |
| 5. | Changes in deferred tax liabilities (+/-) | 1.886 | (4.212) |
| 6. | Tax expense for the year (-) (-1+/-2+3+3 bis+/-4+/-5) |
(32.541) | (83.623) |
| Items/Components | 31.12.2016 |
|---|---|
| Pre-tax profit (loss) for the year from continuing operations | 720.526 |
| Corporate tax (IRES) – theoretical tax charge (27,5%) | (198.145) |
| - effect of non-taxable income and other reductions - permanent | 176.900 |
| - Effect of non-deductible charges and other increases - permanent | (2.624) |
| - benefits from the application of national tax consolidation | - |
| - non-current corporate tax | (2.012) |
| - deferred non-current corporate tax | 1.096 |
| - effect of other changes | (48) |
| Corporate tax – Effective tax charges | (24.833) |
| Regional tax on productive activities (IRAP) – theoretical tax charges (5,57%) | (40.133) |
| - effect of income/charges that are not part of the taxable base | 32.880 |
| - non-current regional tax on productive activities | (212) |
| - deferred non-current regional tax on productive activities | 222 |
| Regional tax on productive activities – Effective tax charges | (7.243) |
| Other taxes | (465) |
| Effective tax charges for the year | (32.541) |
There is no further information to be reported in addition to that already included in previous or following sections of these notes to the consolidated financial statements.
| Earnings per share and diluted earnings per share | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Consolidated profit for the period (in thousands of Euro) | 687.945 | 161.966 |
| Average number of outstanding shares | 53.153.178 | 53.034.493 |
| Average number of potentially dilutive shares | 9.635 | 5.787 |
| Average number of diluted shares | 53.143.543 | 53.028.706 |
| Consolidated earnings per share (Units of Euro) | 12,94 | 3,05 |
| Consolidated diluted earnings per share (Units of Euro) | 12,95 | 3,05 |
Potentially dilutive shares refer to share-based payments for upfront variable pay, as described in Part I of these Notes.
The changes in the values of assets recognised during the year against valuation reserves are reported below.
| Items (in thousands of Euro) |
Gross amount |
Income tax |
Net amount |
|
|---|---|---|---|---|
| 10. | Profit (loss) for the period | X | X | 687.985 |
| Other comprehensive income, net of taxes, without reversal to income statement |
61 | 17 | 44 | |
| 20 | Property, plant and equipment | - | - | - |
| 30. | Intangible assets | - | - | - |
| 40. | Defined benefit plans | 61 | 17 | 44 |
| 50. | Non-current assets under disposal | - | - | - |
| 60. | Share of valuation reserve of equity accounted investments | - | - | - |
| 70. | Foreign investment hedges: | - | - | - |
| a) fair value gains (losses) | - | - | - | |
| b) reclassification to profit or loss | - | - | - | |
| c) other changes | - | - | - | |
| 80. | Exchange rate differences: | (1.085) | - | (1.085) |
| a) fair value gains (losses) | (1.085) | - | (1.085) | |
| b) reclassification to profit or loss | - | - | - | |
| c) other changes | - | - | ||
| 90. | Cash flow hedges: | - | - | - |
| a) fair value gains (losses) | - | - | - | |
| b) reclassification to profit or loss | - | - | - | |
| c) other changes | - | - | - | |
| 100. | Available for sale financial assets: | (15.230) | (5.087) | (10.143) |
| a) fair value gains (losses) | (10.205) | (3.425) | (6.780) | |
| b) reclassification to profit or loss | (7.862) | (2.600) | (5.262) | |
| - impairment losses |
- | |||
| - profit/loss from realisation |
(7.862) | (2.600) | (5.262) | |
| c) other changes | 2.837 | 938 | 1.899 | |
| 110 | Non-current assets under disposal: | - | - | - |
| a) fair value gains (losses) | - | - | - | |
| b) reclassification to profit or loss | - | - | - | |
| c) other changes | - | - | - | |
| 120 | Share of valuation reserve of equity accounted investments: | - | - | - |
| a) fair value gains (losses) | - | - | - | |
| b) reclassification to profit or loss | - | - | - | |
| - impairment losses | - | - | - | |
| - profit/loss from realisation | - | - | - | |
| c) other changes | - | - | - | |
| 130 | Total other comprehensive income | (16.254) | (5.070) | (11.184) |
| 140 | Total comprehensive income (item 10+130) | (16.254) | (5.070) | 676.801 |
| 150. | Total consolidated comprehensive income attributable to non-controlling interests |
- | - | (40) |
| 160 | Total consolidated comprehensive income attributable to the parent company |
(16.254) | (5.070) | 676.761 |
The prudential supervisory provisions for banks continue to strengthen the system of rules and incentives that allow to measure more accurately potential risks connected to banking and financial operations as well as maintain internal capital levels more suited to the effective level of risk exposure of each intermediary.
Concerning risk governance, the Group regularly reviews the strategic guidelines set out in the so-called Risk Appetite Framework. Meanwhile, the second pillar of the provisions includes the ICAAP process (Internal Capital Adequacy Assessment Process), pursuant to which the Group autonomously assesses its own current and expected capital adequacy in relation to both so-called first-pillar risks (credit risk, counterparty risk, market risk and operational risk) and other risks (banking book interest rate risk, concentration risk, etc.).
This examination accompanied the preparation and submission to the Supervisory body of the annual ICAAP report as at 31 December 2015.
Concerning liquidity, in 2016 Banca IFIS prepared the first ILAAP (Internal Liquidity Adequacy Assessment Process) report, and it will prepare the same document in 2017 considering the scope of the new banking Group. Liquidity is managed at consolidated level starting from the day following the closing of the acquisition of the former Interbanca Group.
In May 2016, again with reference to 31 December 2015 and in compliance with the obligations in the relevant provisions, Banca IFIS published information on its capital adequacy, its exposure to risks, and the general characteristics of the systems it has put in place to identify, measure and maage these risks. This document has been published on Banca IFIS's website www.bancaifis.it in the 'Investor relations' section.
With reference to the above, and as per Circular 285 of 17 December 2013 as amended - Supervisory Provisions for banks - the Banca IFIS Group has set up an Internal Control System that aims to guarantee a reliable and sustainable generation of value in a context of sensible risk control and taking, so as to protect the Group's financial solidity. This document has been updated also to include the newly acquired business scope. Banca IFIS's Internal Control System consists of rules, procedures and organisational structures aiming to ensure corporate strategies are complied with and the following goals achieved:
Audits involve all personnel to varying degrees and constitute an integral part of day-to-day operations. They can be classified according to the relevant organisational structures. Some types of audits are highlighted below:
areas are consistent with the risk appetite and tolerance objectives set out every year in the socalled Risk Appetite Framework. They are assigned to second line of defense functions;
• Internal audit activities aim to identify anomalies and violations of procedures and regulations, as well as to assess the overall efficiency and effectiveness of the Internal Control System. These activities are carried out all the time, either regularly or exceptionally, by structures other than and independent from the operational ones, also via on-the-spot audits.
The role of the different players involved in the Internal Control System (the Board of Directors, the Control and Risks Committee, the Executive Director in charge of the Internal Control System, the Supervisory Body as per Legislative Decree no. 231, the Internal Audit Function, the Corporate Accounting Reporting Officer, the Risk Management Function, the Compliance Function, and the Anti-Money Laundering Function) are described in detail in the 'Report on Corporate Governance and Shareholding Structure', prepared pursuant to the third paragraph of article 123 bis of Italian Legislative Decree 58 of 24 February 1998 (Consolidated Law on Finance) as amended, approved by the Board of Directors on 02 February 2016 and published on the Bank's Internet website in the Corporate Governance section.
The banking group currently operates in the following fields:
At the end of 2016, Banca IFIS acquired the former GE Capital Interbanca Group and expanded its core business to corporate lending, structured finance, and finance and operating leases. The clients of the corporate lending and structured finance segments are usually corporations. The receivables portfolio of the company operating in the leasing segment is highly granular, with a limited number of exposures concentrated on individual clients. It serves entities with different legal forms, including corporations, partnerships, co-operatives, and sole proprietorships.
10 Operating leases are made through a company that is not part of the banking group—as defined by supervisory regulations— IFIS rental services.
The factoring business is characterised by the direct assumption of risks related to granting advances and loans, as well as guarantees, if any, on trade receivables of mainly small- and medium-sized enterprises. As part of its operations, the factoring segment purchases receivables due from public health service and local authorities outright.
Concerning the acquisition of distressed financial (Distressed Retail Loans, i.e. non-performing loans), trade and tax receivables, the sellers are usually banks, financial institutions, insolvency proceedings, and businesses.
Given the particular business of the Group's companies, credit risk is the most important element to consider as far as the general risks assumed by the Group are concerned. Maintaining an effective credit risk management is a strategic objective for the Banca IFIS Group, pursued by adopting integrated tools and processes that ensure proper credit risk management at all stages (preparation, lending, monitoring and management, and interventions on troubled loans).
In 2016 there were no new significant transactions in Italian government bonds. At the end of 2016, the securities portfolio's overall average residual life was approximately 15 months, and the maximum duration per individual asset was 40 months.
The Banca IFIS Group does not carry out any operation involving credit derivatives.
Credit risks in financing operations through Factoring, Lending and Leasing directly arise from financing the business customers and guaranteeing them, when requested, against default. Credit risk management takes place during two specific phases of the credit process: the initial credit assessment phase and, in case of a positive outcome, throughout the entire relationship with the customers. In order to increase the quality of its receivables portfolio, Banca IFIS deemed it appropriate to centralise the main phases related to risk taking and control as part of factoring operations in the Bank's Head Office, allowing for a high degree of homogeneity in lending operations and to strictly monitor individual positions through the specialisation of resources and separation of functions at all decision-making levels. In carrying out their operations, the subsidiaries Interbanca and its subsidiaries, as well as the Polish subsidiary IFIS Finance, can independently take certain decisions within the operational and organisational limits defined by the Parent Company Banca IFIS.
The first stage of the risk management process involves an organisational structure responsible for assessing the creditworthiness of borrowers. A multi-level system of delegations and decision-making powers allows the most senior analysts to assume increasingly growing, but still modest, risks. Greater risks can be taken by Area or Business Unit managers. As for higher amounts, powers are attributed solely to the Committee or bodies with management or strategic supervision functions.
Banca IFIS spa's branches do not have decision-making powers as for the assumption of credit risk. Rather, they have the responsibility of doing business in the local area and managing relationships with customers. Therefore, within the limits and with the procedures established by the Head Office's competent bodies, Branches manage ordinary operations with customers under the constant monitoring of the central structures.
At the Group's various companies, qualified and specialised staff follow all stages of a relationship: from the administrative management of the receivables to their collection, from the identification of anomalies, if any, to the verification and definition of the most appropriate actions to recover the debt.
As already specified, the Banca IFIS Group purchases also distressed receivables in the following business areas:
Purchasing the different types of receivables is a fundamental aspect of the credit process. Prior to this phase, highly-skilled analysts carry out a thorough due diligence of the portfolio being transferred and the relevant organisational impact. Once the due diligence is completed, the Group sets the terms and conditions for offering/acquiring the receivables portfolio and how to manage it (individual or collective method), assessing the relevant impact on operating structures.
In order to collect distressed retail loans (NPL Area receivables), the Banca IFIS Group relies on an inhouse legal office, a widespread and tested network of credit collection companies operating throughout Italy, and a network of agents. This structure, together with several lawyers located near the courts, ensures the utmost flexibility as well as effective and timely actions to recover all types of receivables.
The Banca IFIS Group pays particular attention to the concentration of credit risk with reference to all the Group's companies, both at an individual and consolidated level. Banca IFIS's Board of Directors has delegated the Top Management to take action to contain major risks. In line with the Board of Directors' instructions, all positions at risk which significantly expose the Group, even if amounting to less than 10% of regulatory capital, are systematically monitored. In addition, the single-name concentration risk is monitored at the Group level through the Granularity Adjustment (GA). The algorithm used to calculate the Granularity Adjustment is the one defined in Annex B, Title III of Circular no. 285 of 17 December 2013.
As part of financing operations through Factoring, Lending and Leasing, credit risk is constantly monitored by means of procedures and instruments allowing to rapidly identify particular anomalies.
Banca IFIS has instruments and procedures in place allowing to specifically evaluate and monitor risks for each credit facility. In particular:
Following a positive assessment and after starting to work with the customer, the bank continues to monitor the relevant credit risk using selected databases. The lending decision always takes into account the overall exposure to the counterparty (or related groups, if any).
As for Lending operations, loans to customers are monitored by the relevant areas, which are responsible for constantly and pro-actively monitoring borrowers based on:
As for Leasing operations, in 2011 the sector activated an automated universal data (AUD) system that can propose an outcome to the credit analyst, supporting him or her in making a decision. Concerning the Auto Leasing portfolio, the sector also analyses the quality of sales channels in order to divide the network of agents into clusters and adequately price future volumes.
As for the operations of the NPL Area and the purchases of tax receivables arising from insolvency proceedings, in order to ensure increasingly efficient control over the operations undertaken, the Group has continued to invest in IT systems dedicated to monitoring those portfolios.
Purchases of distressed retail loans are particularly significant. Those loans are classified as from their acquisition under non-performing exposures. These are financial receivables (purchased from consumer credit companies, banks and leasing companies) and, to a lesser extent, trade receivables (acquired from insolvency proceedings and companies) which, in light of the characteristics of the receivable and the invoice seller, are duly classified in portfolios homogeneous in terms of management and collection methods (judicial and non-judicial). In particular, the Bank implements the following methods:
collective management, characterised by non-judicial collection operations carried out mainly by specialist collection agencies, the network of professionals-agents, and the call centre;
individual management, characterised by judicial collection operations.
As for the credit risk associated with the bond portfolio, which consists exclusively of Italian government bonds, the Banca IFIS Group constantly monitors the credit quality. The Risk Management function periodically reports to the bank's Board of Directors and Top Management on the composition of the bond portfolio.
As for Basel 2 principles for calculating capital requirements against first-pillar credit risks, Banca IFIS chose to adopt the Standardised Approach.
As part of factoring operations, when the type and/or quality of factored receivables do not fully satisfy requirements or, more generally, the invoice seller is not sufficiently creditworthy, the bank's established practice is to hedge the credit risk assumed by the Group by obtaining additional surety bonds from the shareholders or directors of the invoice seller.
As for the account debtors in factoring relationships, wherever the Bank believes that the elements available to assess the account debtor do not allow to properly measure/assume the related credit risk, or the proposed amount of risk exceeds the limits identified during the debtor's assessment, the Bank adequately hedges the risk of default of the account debtor. Guarantees issued by correspondent factors and/or insurance policies underwritten with specialised operators are the main hedge against non-domestic account debtors in non-recourse operations.
As for the Lending sector, based on the peculiarities of its products, it demands adequate collateral according to the counterparty's standing as well as the term and type of the facility. Said collateral includes mortgage guarantees, liens on plant and equipment, pledges, surety bonds, credit insurance, and collateral deposits.
As for Finance Leases, the credit risk is mitigated by the leased asset. The lessor maintains the ownership until the purchase option is exercised, ensuring a higher recovery rate in the event the client defaults.
As for operations concerning distressed loans (NPL Area receivables and purchases of tax receivables arising from insolvency proceedings) and the relevant business model, generally no action is taken to hedge credit risks.
Non-performing loans are classified essentially according to the Bank of Italy's criteria.
Concerning factoring operations, the relevant Head Office units constantly monitor clients. If the situation deteriorates or problems emerge, the Troubled Loans Area takes over the management of the exposures. Based on available information, it also considers whether or not to classify the counterparty as unlikely to pay or bad loan. Managing non-performing exposures, either unlikely to pay or bad loans, normally falls under the responsibility of the Troubled Loans Area, which takes the most appropriate actions to hedge and recover debts, periodically reporting to the Top Management and the Board of Directors. Individual value adjustments, upon proposal by the Troubled Loans Area, are assessed by the Top Management and submitted to the Board of Directors for approval.
A similar process is formally in place also for IFIS Finance Sp. Z o. o.. Nonetheless, it should be noted that the subsidiary has only a marginal amount of non-performing exposures.
Concerning Lending, Workout & Credit Recovery, this ensures that the classifications of distressed receivables in the risk categories established by supervisory provisions and recognised as non-performing exposures are regularly updated. The Bank manages non-performing loans by:
In this regard, the Bank performs the impairment test using the DCF (Discounted cash flow) method in the case of distressed borrowers that are still operational, or the LV (Liquidation value) method when the value of collateral represents a certain source of recovery. The Bank regularly updates the value of the mortgage based on independent appraisals adjusted to account for any losses arising from the realisation.
Concerning Leasing operations, the debt collection process is handled by the Collection office, which, after consulting with the Banking Group's various Business Units in the case of common clients, identifies the positions to be classified as bad loans among the entities with one of the contractual statuses established by internal policies.
Virtually all of NPL area receivables are classified under non-performing exposures. Purchasing receivables at amounts well below their par value and the fact that cash flows are generally higher than the price paid minimise the risk of losses.
As for non-performing exposures purchased and not yet collected, the overall outstanding book value of the portfolio is approximately 9.659 million Euro, considering the sales completed at the end of the year. At the time of purchase, the historical book value of these receivables was approximately 9.846 million Euro, and they were acquired for approximately 479 million Euro, i.e. an average price equal to approximately 4,3% of the historical book value. In 2016, approximately 3.091 million Euro were acquired for approximately 195 million Euro, i.e. an average price equal to 6,63%. The overall portfolio of non-performing exposures purchased and not yet collected has an overall weighted average life of around 24 months compared to their acquisition date.
Furthermore, it should be noted that overall at the end of 2016 there were approximately 102 million Euro in outstanding bills of exchange (the amount does not include, for instance, nearly 366 million Euro in outstanding settlement plans).
In January, June, July, August and December 2016, the bank completed five sales of portfolios to leading players whose business is purchasing NPLs. Overall, Banca IFIS sold receivables with an outstanding book value of nearly 1,6 billion Euro, consisting of approximately 233 thousand position, for an overall consideration of about 112 million Euro.
The figures at 31 December 2016 do not include the receivables involved in one of the sales completed at the end of December, when the Bank accepted the buyer's binding offer, with an outstanding par value of approximately 744 million Euro. The sale was finalised on 16 January 2017.
Concerning the changes in amortised cost other than impairment related to the bad loans of the NPL segment, in 2015 the Bank started classifying them no longer under item 130 Net impairment losses/reversals on receivables, but rather under item 10 Interest income.
Future cash flows from non-judicial operations are simulated using a statistical model, based on the proprietary portfolio's historical evidence, segmented by different drivers (the model is based on curves of breakdown over time calculated using proprietary historical technical bases). During 2015, the Bank reviewed the cash flow simulation model, as debt collection operations have significantly changed over the years. The revised model uses updated historical time series (2000-2015) and ensures that different types of collection instruments with similar characteristics are treated consistently. In addition, it allows to greatly reduce processing times.
As for individual operations, the cash flows are partly the result of the collection estimated by the manager and, only for the positions for which a court has issued a garnishment order, are calculated using a statistical model based on the data gathered from the proceedings. As in the case of collective operations, these estimates account for credit risk.
The gross exposures reported in the following tables account for the positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiaries over time.
A.1 Non-performing and performing loans: amounts, impairment losses, trend, economic and geographical distribution
| Portfolio/Quality | Bad loans | Unlikely to pay | Non-perform ing past due expo sures |
Performing past due expo sures |
Performing ex posures |
Total |
|---|---|---|---|---|---|---|
| 1. Available for sale financial assets |
353.151 | 353.151 | ||||
| 2. Held to maturity financial assets |
- | |||||
| 3. Due from banks | 1.901 | 1.391.457 | 1.393.358 | |||
| 4. Loans to customers | 385.746 | 448.975 | 137.440 | 360.764 | 4.595.287 | 5.928.212 |
| 5. Financial assets at fair value |
- | |||||
| 6. Financial assets under disposal |
- | |||||
| Total 31.12.2016 | 385.746 | 448.975 | 137.440 | 362.665 | 6.339.895 | 7.674.721 |
| Total 31.12.2015 | 190.286 | 234.546 | 58.214 | 883.405 | 5.382.869 | 6.749.320 |
Equity securities and UCITS units are not included in this table.
| Non-performing loans | Performing loans | ||||||
|---|---|---|---|---|---|---|---|
| Portfolio/Quality | Gross expo- sure |
Specific value adjustments |
Net exposure | Gross expo sure |
Portfolio value adjustments |
Net exposure | (net exposure) Total |
| 1. Available for sale financial assets | 15.077 | 15.077 | - | 353.151 | - | 353.151 | 353.151 |
| 2. Held to maturity financial assets |
- | - | - | - | - | - | - |
| 3. Due from banks | - | - | - | 1.393.374 | 16 | 1.393.358 | 1.393.358 |
| 4. Loans to customers | 1.928.431 | 956.270 | 972.161 | 5.003.316 | 47.265 | 4.956.051 | 5.928.212 |
| 5. Financial assets at fair value | - | - | - | X | X | - | - |
| 6. Financial assets under disposal | - | - | - | - | - | - | - |
| Total 31.12.2016 | 1.943.508 | 971.347 | 972.161 | 6.749.841 | 47.281 | 6.702.560 | 7.674.721 |
| Total 31.12.2015 | 727.780 | 244.734 | 483.046 | 6.277.698 | 11.424 | 6.266.274 | 6.749.320 |
Equity securities and UCITS units are not included in this table.
In compliance with paragraph 37, letter a) of IFRS 7 "Financial Instruments: Disclosures", here below is the maturity analysis for past due amounts relating to performing loans – Other loans.
| (in thousands of Euro) | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Past due up to 3 months | 148.661 | 387.750 |
| Past due > 3 months < 6 months | 38.021 | 159.771 |
| Past dye > 6 months < 1 year | 49.211 | 112.691 |
| Past due > 1 year | 124.870 | 224.403 |
| Total | 360.763 | 884.615 |
| Gross exposure | ||||||||
|---|---|---|---|---|---|---|---|---|
| Non-performing loans | Specific net | |||||||
| Types of loans/ amounts |
up to 3 months | Over 3 to 6 months |
Over 6 months to 1 year |
Over 1 year | Performing loans | value adjust ments |
Portfolio value adjustments |
Net exposure |
| A. ON-BALANCE-SHEET EXPOSURES |
||||||||
| a) Bad loans | - | - | - | - | X | - | X | - |
| - of which: forborne expo sures |
- | - | - | - | X | - | X | - |
| b) Unlikely to pay | - | - | - | - | X | - | X | - |
| - of which: forborne expo sures |
- | - | - | - | X | - | X | - |
| ) Non-performing past due exposures |
- | - | - | - | X | - | X | - |
| - of which: forborne expo sures |
- | - | - | - | X | - | X | - |
| d) Performing past due expo sures |
X | X | X | X | - | X | - | - |
| - of which: forborne expo sures |
X | X | X | X | - | X | - | - |
| e) Other performing expo sures |
- | X | X | - | 1.391.146 | X | - | 1.391.146 |
| - of which: forborne expo sures |
X | X | X | X | X | - | ||
| Total A | - | - | - | - | 1.391.146 | - | - | 1.391.146 |
| B. OFF-BALANCE-SHEET EXPOSURES |
||||||||
| a) Non-performing | - | - | - | - | X | - | X | X |
| b) Performing | - | X | X | - | 6.864 | X | - | 6.864 |
| Total B | - | - | - | - | 6.864 | - | - | 6.864 |
| TOTAL A+B | - | - | - | - | 1.398.010 | - | - | 1.398.010 |
On-balance-sheet exposures include all on-balance-sheet financial assets due from banks, regardless of the portfolio they are included in (held for trading, available for sale, held to maturity, loans and receivables etc.).
| Gross exposure | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Non-performing loans | Specific net | Portfolio | |||||||
| Types of loans/amounts | up to 3 months | Over 3 to 6 months |
Over 6 months to 1 year |
Over 1 year | Performing loans |
value adjust ments |
value ad justments |
Net expo sure |
|
| A. ON-BALANCE-SHEET EXPO SURES |
|||||||||
| a) Bad loans | 167.560 | 1 | 15.856 | 939.674 | X | 737.534 | X | 385.557 | |
| - of which: forborne exposures | 11.777 | - | - | 87.929 | X | 58.130 | X | 41.576 | |
| b) Unlikely to pay | 189.223 | 2.540 | 24.987 | 421.797 | X | 189.628 | X | 448.919 | |
| - of which: forborne exposures | 135.491 | 11.209 | 140.748 | X | 116.192 | X | 171.256 | ||
| ) Non-performing past due exposures | 97.954 | 10.575 | 6.068 | 39.168 | X | 18.237 | X | 135.529 | |
| - of which: forborne exposures | 1.471 | - | - | - | X | 15 | X | 1.456 | |
| d) Performing past due exposures | X | X | X | X | 366.357 | X | 5.594 | 360.763 | |
| - of which: forborne exposures | X | X | X | X | X | - | - | ||
| e) Other performing exposures | X | X | X | X | 4.874.252 | X | 39.193 | 4.835.059 | |
| - of which: forborne exposures | X | X | X | X | 44.265 | X | 1.427 | 42.838 | |
| Total A | 454.737 | 13.116 | 46.911 | 1.400.639 | 5.240.609 | 945.399 | 44.787 | 6.165.827 | |
| B. OFF-BALANCE-SHEET EXPO SURES |
|||||||||
| a) Non-performing | 52.831 | - | - | - | X | 17.633 | X | 35.198 | |
| b) Performing | X | X | X | X | 419.361 | X | 159 | 419.202 | |
| Total B | 52.831 | - | - | - | 419.361 | 17.633 | 159 | 454.400 | |
| TOTAL A+B | 507.568 | 13.116 | 46.911 | 1.400.639 | 5.659.970 | 963.032 | 44.946 | 6.620.227 |
On-balance-sheet exposures include all on-balance-sheet financial assets due from customers, regardless of the portfolio they are included in (available for sale, held to maturity, loans and receivables).
A.1.7 Banking group - On-balance-sheet exposures to customers: trends in gross non-performing exposures
| Type/Categories | Bad loans | Unlikely to pay | Past due loans |
|---|---|---|---|
| A. Opening gross exposure | 414.740 | 253.252 | 59.788 |
| - of which: transferred and not derecognised | - | - | - |
| B. Increases | 925.835 | 678.549 | 578.056 |
| B.1 inflows from performing loans | 672 | 34.168 | 460.111 |
| B.2 transfers from other non-performing loan categories | 65.122 | 38.018 | 15 |
| B.3 other increases | 316.832 | 266.507 | 70.811 |
| Business combinations | 543.209 | 339.856 | 47.119 |
| C. Reductions | 217.484 | 293.254 | 484.078 |
| C.1 outflows to performing loans | 66 | 638 | 299.694 |
| C.3 derecognitions | 25.429 | 21.706 | 1.317 |
| C.3 collections | 61.028 | 100.400 | 106.305 |
| C.4 collections from sales | 21.067 | 9.037 | - |
| C.5 losses on disposal | - | - | - |
| C.4 transfers to other non-performing loan categories | 1.220 | 62.183 | 39.740 |
| C.5 other reductions | 108.674 | 99.290 | 37.022 |
| D. Closing gross exposure | 1.123.091 | 638.547 | 153.766 |
| - of which: transferred and not derecognised | - | - | - |
On-balance-sheet exposures include all on-balance-sheet financial assets due from customers, regardless of the portfolio they are included in (available for sale, held to maturity, loans and receivables).
Total net non-performing exposures amounted to 972,2 million Euro, compared to 483,0 million Euro at the end of 2015 (+101,3%).
Total bad loans to customers at 31 December 2016, net of value adjustments, totalled 385,7 million Euro, against 190,3 million Euro at 31 December 2015 (+102,7%). The change was essentially due to the purchases made by the NPL Area during the year; the Trade Receivables segment reported a 2,4% increase. The net bad loans of the new Corporate Banking and Leasing sectors totalled 27,3 and 6,2 million Euro, respectively.
At 31 December 2016, unlikely to pay amounted to 449,0 million, compared to 234 million Euro in 2015 (+91,4%), of which 241,5 million Euro related to the NPL Area (+23,9 million Euro from the end of 2015), 124,7 million Euro to the Corporate Banking sector, and 13,6 million Euro to the Leasing sector. The Trade Receivables segment's unlikely to pay were up 28,7%.
Net non-performing past due exposures totalled 137,4 million Euro at 31 December 2016, compared with 58,2 million Euro in December 2014 (+136,1%). The increase was largely attributable to past due loans due from the Public Administration that were purchased outright, rising from 1,2 million Euro at the end of 2015 to 46,8 million Euro at the end of 2016. Changes in non-performing past due exposures are part of Banca IFIS's business model. In addition, the Leasing and Corporate Banking sectors reported 17,4 million Euro and 1,7 million Euro worth of past due loans, respectively.
| Type/Categories | Forborne exposures: non-performing |
Forborne exposures: performing |
|---|---|---|
| A. Opening gross exposure | 60.893 | 2.977 |
| - of which: transferred and not derecognised | - | - |
| B. Increases | 417.504 | 54.246 |
| B.1 inflows from non-forborne performing exposures | 3.079 | 89 |
| B.2 inflows from forborne performing exposures | - | X |
| B.3 inflows from non-performing forborne exposure | X | 321 |
| B.4 other increases | 149.339 | 13.789 |
| Business combinations | 265.086 | 40.047 |
| C. Reductions | 89.772 | 12.958 |
| B.1 outflows to non-forborne performing exposures | X | - |
| B.2 outflows to forborne performing exposures | 321 | X |
| B.3 outflows to non-performing forborne exposure | X | - |
| C.4 derecognitions | 1 | - |
| C.5 collections | 48.460 | 12.441 |
| C.6 collections from sales | 10.456 | - |
| C.7 losses on disposal | - | - |
| C.8 other reductions | 30.534 | 517 |
| D. Closing gross exposure | 388.625 | 44.265 |
| - of which: transferred and not derecognised | - | - |
A.1.8 Banking group - On-balance-sheet exposures to customers: trends in overall impairment losses/reversals
| Bad loans | Unlikely to pay | Non-performing past due exposures |
||||||
|---|---|---|---|---|---|---|---|---|
| Type/Categories | Total | Of which forborne ex posures |
Total | Of which forborne ex posures |
Total | Of which forborne ex posures |
||
| A. Opening balance of total im pairment losses/ reversals of im pairment losses |
224.454 | 885 | 18.706 | 5.406 | 1.574 | 144 | ||
| - of which: transferred and not de recognised |
- | - | - | - | - | - | ||
| B. Increases | 534.984 | 57.539 | 194.656 | 112.236 | 21.365 | 15 | ||
| B.1 Impairment losses | 18.161 | 6.243 | 22.194 | 6.481 | 158 | - | ||
| B.2 losses on disposal | - | - | - | - | - | - | ||
| B.3 transfers from other non-per | ||||||||
| forming loan categories | 13.138 | 2.604 | 905 | 144 | 2.624 | - | ||
| B.4 other increases | 1.436 | 3.016 | 215 | 62 | 240 | - | ||
| Business combinations | 502.249 | 45.676 | 171.342 | 105.549 | 18.343 | 15 | ||
| C. Reductions | 21.904 | 294 | 23.734 | 1.450 | 4.702 | 144 | ||
| C.1 impairment reversals from measurement |
2.383 | 7 | 3.594 | 2 | 253 | - | ||
| C.2 impairment reversals from col lection |
109 | 19 | 186 | 86 | 111 | - | ||
| C.3 gains on disposal | - | - | - | - | - | - | ||
| C.4 derecognitions | 18.485 | - | 2.923 | 1 | 3.566 | - | ||
| C.5 transfers to other non-perform ing loan categories |
748 | - | 15.424 | 2.604 | 495 | 144 | ||
| C.6 other reductions | 179 | 268 | 1.607 | 1.065 | 277 | - | ||
| D. Closing balance of total im | ||||||||
| pairment losses/ reversals of im | ||||||||
| pairment losses | 737.534 | 58.130 | 189.628 | 116.192 | 18.237 | 15 | ||
| - of which: transferred and not derecognised |
- | - | - | - | - | - |
For the purposes of calculating capital requirements against credit risk, the Banca IFIS Group uses the external credit assessment institution (ECAI) Fitch Ratings exclusively for the positions categorised within "Exposures to Central Governments and Central Banks" of Banca IFIS, and the ratings agency Moody's for the positions categorised within "Exposures to Central Governments and Central Banks" of the former GE Capital Interbanca Group; no external ratings are used for the other asset classes. In light of the composition of the Group's assets, external ratings are used exclusively for the portfolio of government bonds.
The Bank does not use internal ratings for the purposes of calculating capital absorption. Banca IFIS spa has implemented an Internal Rating System for domestic businesses, which was developed using proprietary databases and consists of:
| Co l |
la l g ter a ua |
( 1 tee ran s |
) | Pe | l g rso na |
tee ua ran |
( 2 ) s |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cr e |
d i t de r |
iva t ive s |
Un se cu |
d loa re |
ns | ||||||||||
| e r u s |
O t he r |
de iva t ive r |
s | ||||||||||||
| o p x e t e N |
s e g a g rt o M y rt e p ro P |
e c n a s n e Fi s y a rt e L e p ro P |
s ie rit u c e S |
r a u g l ra s te e e la nt ol a c r e th O |
N L C |
d n s a k s n nt a b e l m ra rn nt e e v c o G |
s e iti nt e ic bl u p r e th O |
s k n a B |
s e iti nt e r e th O |
d n s a k s n nt a b e l m ra rn nt e e v c o G |
s e iti nt e ic bl u p r e th O |
s k n a B |
s e iti nt e r e th O |
To l ta ( 1 ) ( 2 ) + |
|
| Gu 1. tee d o ba lan he t e ara n n- ce -s e xp os ure s: |
1. 1 6. 9 8 2 5 |
3 3. 4 6 3 5 |
- | 2 1. 8 6 3 |
1 0 1. 6 7 5 |
- | - | - | 6 6 3 4 5. |
- | - | - | 3. 3 1 0 |
2 3. 3 3 8 7 |
9 9 9. 2 8 3 |
| 1. 1 to ta l ly tee d g ua ran |
8 7 0. 7 2 3 |
5 0 6. 3 1 5 |
- | 8. 1 2 4 |
6 3. 7 4 7 |
- | - | - | 6 5. 6 3 4 |
- | - | - | 3. 3 1 0 |
2 2 1. 3 9 2 |
8 6 8. 5 2 2 |
| f w h ic h n for ing - o on -p er m |
1 3 9. 1 3 7 |
9 7. 9 9 6 |
- | 1 2 0 |
3. 0 9 4 |
- | - | - | - | - | - | - | - | 3 7. 9 2 6 |
1 3 9. 1 3 6 |
| 1. 2 p ia l ly d t tee ar g ua ran |
2 8 6. 2 5 9 |
2 7. 1 4 8 |
- | 1 3. 7 3 9 |
3 7. 9 2 8 |
- | - | - | - | - | - | - | - | 5 1. 9 4 6 |
1 3 0. 7 6 1 |
| f w for h ic h n ing - o on -p er m |
4. 3 9 5 5 |
1 1. 4 3 0 |
- | 6 7 |
3. 0 9 3 |
- | - | - | - | - | - | - | - | 1 3. 6 5 5 |
2 8. 1 4 6 |
| 2. Gu tee d o f f- ba lan he t e ara n ce -s e xp os ure s: |
2 3. 7 1 1 |
1. 5 0 0 |
- | 3. 4 9 8 |
2 1 |
- | - | - | - | - | - | - | - | 3. 6 6 2 |
8. 6 8 1 |
| 2. 1 l ly d to ta tee g ua ran |
7. 6 6 8 |
1. 1 7 2 |
- | 2. 8 3 6 |
- | - | - | - | - | - | - | - | - | 3. 6 5 9 |
7. 6 6 7 |
| f w h ic h n for ing - o on -p er m |
3. 6 6 6 |
1 5 |
- | - | - | - | - | - | - | - | - | - | - | 3. 6 1 5 |
3. 6 6 6 |
| 2. 2 p t ia l ly tee d ar g ua ran |
1 6. 0 4 3 |
3 2 8 |
- | 6 6 2 |
2 1 |
- | - | - | - | - | - | - | - | 3 | 1. 0 1 4 |
| f w h ic h n for ing - o on -p er m |
1 0. 8 9 1 |
- | - | - | 1 7 |
- | - | - | - | - | - | - | - | 3 | 2 0 |
B.1 Banking group - Distribution of on- and off-balance-sheet exposures to customers by segment (book value)
| Go ve |
rnm en |
ts | O t he r p |
b l ic u en |
t i t ies |
F ina ia nc |
l ins t i tu |
t ion s |
Ins ura |
nc e c ies |
a- n om p |
f No ina n- |
ia l c nc om |
ies p an |
O t he t i t ies r e n |
|||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| /co Ex ter t ies p os ure s un p ar |
e r u s o p x e t e N |
r ai p m i c fi ci e p S |
r e e ai /r /r p s s e m e s s i s s io o o ol t l t l f n n rt e e o m m P |
e r u s al o s p r x e e v t e N |
r e ai /r p s e m s i s c o fi t l ci n e e p m S |
r e ai /r p s m e al s i s s io r o e ol t l v f n rt e o m P |
e r u s al o s p r x e e v t e N |
r e ai /r p s e m al s i s c o fi t l ci n e e p m S |
r e ai /r p s m e s i s s io r o e ol t l v f n rt e o m P |
e r u s al o s p r x e e v t e N |
r e ai /r p s e m s i s c o fi t l ci n e e p m S |
r e ai /r p s m e s i s io o ol t l f n rt e o m P |
e r u s al o s p r x e e v t e N |
r e ai /r p s e m al s s i s c r o e fi t l v ci n e e p m S |
r e ai /r p s m e al s i s s io r o e ol t l v f n rt e o m P |
e r u s o p x e t e N |
r e ai /r p s e m al s s i s c r o e fi t l v ci n e e p m S |
r e ai /r p s m e al s i s s io r o e ol t l v f n rt e o m P |
| A. On -ba lan hee t e ce- s xp o |
||||||||||||||||||
| su res A. 1 Ba d loa ns |
- | X | 3. 6 9 5 |
2. 1 6 |
X | 1. 1 7 |
4 9. 8 7 |
X | X | 7 5. 9 7 |
6 2 3. 7 4 |
X | 3 0 4. 7 1 |
6 1. 7 5 |
X | |||
| f w h ic h for bor - o ne exp osu res |
- | X | 2 | X | 8 1. 0 3 2 |
4 8. 0 1 0 |
X | - | - | X | 4 7. 7 8 0 |
7 5 0. 1 2 0 |
X | 0 3 2. 7 6 4 |
1 | X | ||
| A. 2 Un l i ke ly to p ay |
3 3 2 |
1 4 6 |
X | 2. 8 6 2 |
6 2 7 |
X | 2 8. 8 3 5 |
0 4 2 7. |
X | - | - | X | 1 6 6. 1 0 7 |
1 6 1. 9 8 5 |
X | 2 0. 1 6 2 5 |
1 9. 8 5 5 |
X |
| f w for h ic h bor - o ne exp osu res |
X | 2. 1 6 1 |
6 2 1 |
X | 2. 0 4 7 |
2. 8 5 7 |
X | X | 1 1 3. 9 2 0 |
1 1 2. 9 9 3 |
X | 2. 6 8 5 7 |
X | |||||
| for A. 3 No ing t due n-p er m p as ex p osu res |
1 1. 1 5 2 |
3 | X | 3 5. 6 7 4 |
1 0 |
X | 3 6 |
1 3 |
X | - | - | X | 7 5. 7 3 8 |
6. 5 1 9 |
X | 1 2. 9 2 8 |
1 1. 6 9 2 |
X |
| f w h ic h for bor - o ne exp osu res |
X | X | X | X | 1. 4 5 6 |
1 5 |
X | X | ||||||||||
| A. 4 Pe for ing r m ex p osu res |
4 4 8. 1 6 2 |
X | 3 3 |
7 9 9. 9 1 7 |
X | 1 2 1 |
7 2. 2 0 5 |
X | 9 2 7 |
- | X | - | 3. 4 9 5. 4 0 0 |
X | 3 2. 4 6 4 |
3 8 0. 1 3 8 |
X | 1 1. 2 4 2 |
| f w h ic h for bor - o ne exp osu res |
X | X | X | X | 4 2. 8 5 2 |
X | 1. 4 1 3 |
X | ||||||||||
| To ta l A |
4 5 9. 6 4 6 |
1 4 9 |
3 3 |
8 4 2. 1 4 8 |
2. 7 9 9 |
1 2 1 |
1 0 2. 2 2 7 |
5 6. 9 2 9 |
9 2 7 |
- | - | - | 3. 8 1 3. 8 2 3 |
7 9 2. 2 2 4 |
3 2. 4 6 4 |
9 4 7. 9 3 8 |
9 3. 2 9 8 |
1 1. 2 4 2 |
| B. O f f- ba lan hee t e ce- s xp o su res |
||||||||||||||||||
| B. 1 Ba d loa ns |
- | - | X | - | - | X | 2 0 1 |
- | X | - | - | X | - | - | X | - | - | X |
| B. 2 Un l i ke ly to p ay |
- | - | X | - | - | X | - | 1 3. 2 9 2 |
X | - | - | X | 2 5. 0 6 0 |
4. 3 4 1 |
X | - | - | X |
| B. 3 O her for ing t no n-p er m ex p o sur es |
- | - | X | - | - | X | - | - | X | - | - | X | 9. 9 3 7 |
- | X | - | - | X |
| A. 4 Pe for ing r m ex p osu res |
- | X | - | 8 9 5 |
X | - | 4 2. 1 0 5 |
X | - | 6 5 |
X | - | 4 6 0. 3 2 4 |
X | 1 9 5 |
3 2 8 |
X | - |
| To ta l B |
- | - | - | 5 8 9 |
- | - | 4 2. 3 5 1 |
1 3. 2 9 2 |
- | 5 6 |
- | - | 4 9 5. 3 2 1 |
4. 3 4 1 |
1 5 9 |
3 2 8 |
- | - |
| ( ) 3 1. 1 2. 2 0 1 6 To ta l A+ B |
4 5 9. 6 4 6 |
1 4 9 |
3 3 |
8 4 2. 7 3 7 |
2. 7 9 9 |
1 2 1 |
1 4 4. 6 2 3 |
7 0. 2 2 1 |
9 2 7 |
5 6 |
- | - | 4. 3 0 9. 1 4 4 |
7 9 6. 5 6 5 |
3 2. 6 2 3 |
9 4 8. 2 6 6 |
9 3. 2 9 8 |
1 1. 2 4 2 |
| ( ) To ta l A+ B 3 1. 1 2. 2 0 1 5 |
3. 3 2 1. 9 6 1 |
8 4 |
3 2 |
9 0 2. 3 3 2 |
2. 5 0 6 |
7 6 1 |
1 3 7. 2 1 1 |
3. 8 3 0 |
4 7 |
- | - | - | 2. 2 6 1. 5 4 2 |
2 2 8. 3 9 7 |
1 0. 5 0 5 |
3 5 9. 4 0 4 |
9. 9 1 7 |
9 7 |
| I ta |
ly | O he Eu t r rop |
ies tr ea n c ou n |
Am | ica er |
As | ia | Re f t o t s |
he Wo l d r |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Ex / Ge h ic p os ure s og rap are as |
Ne t ex p osu re |
Ov l l im era irm t p a en los /re ses ver ls sa |
Ne t ex p osu re |
Ov l l im era irm t p a en los /re ses ver ls sa |
Ne t ex p osu re |
Ov l l im era irm t p a en los /re ses ver ls sa |
Ne t ex p osu re |
Ov l l im era irm t p a en los /re ses ver ls sa |
Ne t ex p osu re |
Ov l l im era irm t p a en los /re ses ver ls sa |
| A. On -ba lan he t e ce -s e xp os ure s |
||||||||||
| A. 1 Ba d loa ns |
3 8 4. 5 6 1 |
7 3 3. 0 1 0 |
8 3 0 |
3. 1 9 0 |
1 0 |
5 | 2 | - | 1 5 4 |
1. 3 2 9 |
| A. 2 Un l i ke ly to p ay |
4 4 4. 6 0 5 |
1 8 0. 4 1 1 |
4. 1 5 5 |
6. 3 0 9 |
1 5 2 |
2. 9 0 8 |
- | - | 7 | - |
| A. 3 No for ing t du n-p er m p as e e xp o |
1 3 4. 4 1 4 |
1 8. 2 3 7 |
1. 1 1 5 |
- | - | - | - | - | - | - |
| su res A. 4 Pe for ing r m ex p os ure s |
4. 9 2 1. 9 6 4 |
4 2. 1 6 7 |
1 9 9. 4 3 5 |
5 5 5 |
5 9. 8 8 8 |
1. 9 3 9 |
1 3. 8 8 9 |
1 2 3 |
6 4 6 |
3 |
| To ta l A |
5. 8 8 5. 5 4 4 |
9 7 3. 8 2 5 |
2 0 5. 5 3 5 |
1 0. 0 5 4 |
6 0. 0 5 0 |
4. 8 5 2 |
1 3. 8 9 1 |
1 2 3 |
8 0 7 |
1. 3 3 2 |
| B. O f f- ba lan he t e ce -s e xp os ure s |
||||||||||
| B. 1 Ba d loa ns |
2 0 1 |
- | - | - | - | - | - | - | - | - |
| B. 2 Un l i ke ly to p ay |
2 5. 0 6 0 |
4. 3 4 2 |
- | 1 3. 2 9 1 |
- | - | - | - | - | - |
| O for B. 3 t he ing r n on -p er m ex p os ure s |
9. 9 3 7 |
- | - | - | - | - | - | - | - | - |
| A. 4 Pe for ing r m ex p os ure s |
3 5 5. 5 8 2 |
1 5 9 |
6 2. 7 0 7 |
- | 1 8 |
- | 7 8 7 |
- | 5 3 |
- |
| To ta l B |
3 9 0. 7 8 0 |
4. 5 0 1 |
6 2. 7 0 7 |
1 3. 2 9 1 |
1 8 |
- | 7 8 7 |
- | 5 3 |
- |
| To ta l ( A B ) 3 1. 1 2. 2 0 1 6 + |
6. 2 7 6. 3 2 4 |
9 7 8. 3 2 6 |
2 6 8. 2 4 2 |
2 3. 3 4 5 |
6 0. 0 6 8 |
4. 8 5 2 |
1 4. 6 7 8 |
1 2 3 |
8 6 0 |
1. 3 3 2 |
| To l ( A B ) 3 1. 1 2. 2 0 1 ta 5 + |
6. 9 6. 8 0 1 7 |
2 0. 6 0 9 5 |
1 8 4 7 7. 7 |
0 6 5. 5 |
9 7 5 |
1 0 |
9 5. 5 7 |
3 0 |
6 9 0 |
3 |
B.3 Banking group – Geographical distribution of on- and off-balance-sheet exposures to banks (book value)
| Italy | Other European countries |
America | Asia | Rest of the World |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Exposures/Geographic areas | Net exposure | losses/rever Impairment sal |
exposure Net |
losses/rever Impairment |
exposure Net sal |
losses/rever Impairment |
exposure Net |
losses/rever Impairment |
exposure Net |
losses/rever Impairment sal |
| A. On-balance-sheet exposures | ||||||||||
| A.1 Bad loans | - | - | - | - | - | - | - | - | - | - |
| A.2 Unlikely to pay | - | - | - | - | - | - | - | - | - | - |
| A.3 Non-performing past due expo | - | - | - | - | - | - | - | - | - | - |
| sures A.4 Performing exposures |
1.350.332 | - | 24.831 | - | 15.983 | - | - | - | - | - |
| Total A | 1.350.332 | - | 24.831 | - | 15.983 | - | - | - | - | - |
| B. Off-balance-sheet exposures | ||||||||||
| B.1 Bad loans | - | - | - | - | - | - | - | - | - | - |
| B.2 Unlikely to pay | - | - | - | - | - | - | - | - | - | - |
| B.3 Other non-performing expo | - | - | - | - | - | - | - | - | - | - |
| sures A.4 Performing exposures |
740.828 | - | 1.479 | - | - | - | - | - | - | - |
| Total B | 740.828 | - | 1.479 | - | - | - | - | - | - | - |
| Total (A+B) 31.12.2016 | 2.091.160 | - | 26.310 | - | 15.983 | - | - | - | - | - |
| Total (A+B) 31.12.2015 | 85.062 | - | 13.345 | - | 619 | - | - | - | - | - |
| 31.12.2016 | 31.12.2015 | ||
|---|---|---|---|
| a) | Book value | 2.391.848 | 3.552.701 |
| b) | Weighted amount | 660.238 | 195.918 |
| c) | Number | 4 | 5 |
The overall weighted amount of major exposures at 31 December 2016 consisted of 272,2 million Euro in loans to customers and 388,0 million Euro in tax assets.
On 5 August 2011, CONSOB (drawing on ESMA document no. 2011/266 of 28 July 2011) issued Communication no. DEM/11070007 on disclosures by listed companies of their exposures to sovereign debt and market performance, the management of exposures to sovereign debt, and their operating and financial impact.
In compliance with the provisions of the aforementioned communication, it should be noted that at 31 December 2016 the book value of exposures to sovereign debt(1) represented by debt securities was 353,2 million Euro, and consisted entirely of Italian government bonds; these securities, with a par value of 350 million Euro, are classified under Available for sale (AFS) financial assets and included in the banking book; the weighted residual average life of these securities is approximately fifteen months.
The fair values used to measure the exposures to sovereign debt at 31 December 2016 are considered level 1, and the exposures concerned were not impaired at that date. For further details on the measurement method applied and the classification, please refer to the sections on Accounting policies and Information on the consolidated statement of financial position.
Pursuant to the CONSOB Communication, besides the exposure to sovereign debt, it is also necessary to consider receivables due from the Italian National Administration, which at 31 December 2016 totalled 948,6 million Euro, with 106,5 million Euro due from the "central government" (of which 75 million Euro relating to tax receivables) and 842,1 million Euro due from "other public bodies".
The valuation reserve, gross of the tax effect related to the overall position in Italian government bonds, went from a positive 1,4 million Euro (0,9 million Euro net of the tax effect) at the end of first half of 2016 to a positive value of approximately 1,0 million Euro at 16 March 2017 (0,7 million Euro net of the tax effect).
(1) As indicated in the ESMA document, 'exposures to sovereign debt' refer to bonds issued by, and loans given, to central and local government and governmental bodies.
On 7 October 2016, Banca IFIS launched a three-year revolving securitisation of trade receivables due from account debtors. After Banca IFIS (originator) initially reassigned the receivables for 1.254,3 million Euro, the vehicle named IFIS ABCP Programme S.r.l. issued 850 million Euro worth of senior notes subscribed for by the investment vehicles owned by the banks that co-arranged the transaction. An additional tranche of senior notes, with a maximum par value of 150 million Euro—of which investors initially subscribed for 19,2 million Euro, and that was subsequently adjusted based on the composition of the assigned portfolio—was subscribed for by Banca IFIS, which will use them as collateral in refinancing operations with third parties. The difference between the value of the receivables portfolios and the senior notes issued represents the credit granted to the notes' bearers, which consists in a deferred purchase price.
The transaction was arranged in order to raise part of the funding for the acquisition of the former GE Capital Interbanca Group.
Banca IFIS acts as servicer, performing the following tasks:
As part of the securitisation programme, the Bank sends the amount it collects to the vehicle on a daily basis, while the new portfolio is assigned approximately four times each month; this ensures a short time lapse between the outflows from the Bank and the inflows associated with the payment of the new assignments.
Only part of the securitised receivables due from account debtors are recognised as assets—especially for the portion that the Bank has purchased outright, resulting in the transfer of all risks and rewards to the buyer. Therefore, the tables in the quantitative disclosure show only this portion of the portfolio.
In compliance with IASs/IFRSs, currently the securitisation process does not involve the substantial transfer of all risks and rewards, as it does not meet the derecognition requirements set by IAS 39. In addition, the vehicles were consolidated in order to provide a comprehensive view of the transaction.
The maximum theoretical loss for Banca IFIS is represented by the losses that could potentially arise within the portfolio of assigned receivables, and the impact would be the same as if the securitisation programme did not exist; therefore, the securitisation has been accounted for as follows:
At 31 December 2016, the interest on senior notes recognised in profit or loss amounted to 2,2 million Euro (at a 1,15% rate). The up-front costs incurred for these transactions amounted to 0,3 million Euro in commission expense and 0,5 million Euro in operating costs.
In December 2016, IFIS Leasing S.p.A. (originator) finalised a securitisation that involved selling a portfolio of performing loans totalling 489 million Euro to the special purpose vehicle Indigo Lease S.r.l.
The transaction was arranged in order to raise part of the funding for the acquisition of the former GE Capital Interbanca Group.
The securitisation was rated by Moody's and DBRS, which will also perform the annual monitoring throughout the term of the transaction.
The initial purchase price of the assigned receivables portfolio, equal to 489 million Euro, was paid by the vehicle to IFIS Leasing S.p.A. using funds raised from the issue of senior notes for an amount of 366 million Euro. These received an AA3 (sf) rating from Moody's and an AA (sf) rating from DBRS, and their redemption is connected to the collections realised on the receivables portfolio. In addition, the vehicle issued 138 million Euro in junior notes that were acquired by IFIS Leasing S.p.A. and did not receive a rating.
IFIS Leasing S.p.A. acts as servicer, performing the following tasks:
In compliance with IASs/IFRSs, currently the securitisation process does not involve the substantial transfer of all risks and rewards, as it does not meet the derecognition requirements set by IAS 39. In addition, the vehicles were consolidated in order to provide a comprehensive view of the transaction.
The maximum theoretical loss for IFIS Leasing S.p.A. is represented by the losses that could potentially arise within the portfolio of assigned receivables, and the impact would be the same as if the securitisation programme did not exist; therefore, the securitisation has been accounted for as follows:
At 31 December 2016, the interest on the senior notes recognised in profit or loss amounted to 0,1 million Euro (at a 2,43% rate). The up-front costs incurred for these transactions amounted to 8,4 million Euro, including 5,8 million Euro in commission expense and 2,6 million Euro in operating costs. These costs were incurred in part by the vehicle and in part by the Parent Company Banca IFIS.
In December 2016, Interbanca (originator) finalised a securitisation that involved selling a portfolio of performing loans totalling 406 million Euro to the special purpose vehicle Indigo Lease S.r.l.
The transaction was arranged in order to raise part of the funding for the acquisition of the former GE Capital Interbanca Group.
The initial purchase price of the assigned receivables portfolio, equal to 406 million Euro, was paid by the vehicle to Interbanca using funds raised from the issue of senior notes for an amount of 188 million Euro. Their redemption is connected to the collections realised on the receivables portfolio. In addition, the vehicle issued 227 million Euro in junior notes that were acquired by Interbanca.
Interbanca acts as servicer, performing the following tasks:
In compliance with IASs/IFRSs, currently the securitisation process does not involve the substantial transfer of all risks and rewards, as it does not meet the derecognition requirements set by IAS 39. In addition, the vehicles were consolidated in order to provide a comprehensive view of the transaction.
The maximum theoretical loss for Interbanca is represented by the losses that could potentially arise within the portfolio of assigned receivables, and the impact would be the same as if the securitisation programme did not exist; therefore, the securitisation has been accounted for as follows:
At 31 December 2016, the interest on the senior notes recognised in profit or loss amounted to 0,1 million Euro (at a 2,43% rate). The up-front costs incurred for these transactions amounted to 8,4 million Euro, including 5,8 million Euro in commission expense and 2,6 million Euro in operating costs. These costs were incurred in part by the vehicle and in part by the Parent Company Banca IFIS.
C.1 Banking group- Exposures from the main "own" securitisations broken down by type of securitised asset and type of exposure
| On | -ba lan ce -s |
he t e e xp |
os ure s |
Gu tee ara n |
te s g ran |
d | Cr d i e |
t l ine s |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Se | ior n |
Me zza |
ine n |
Ju n |
ior | Se | ior n |
Me zza |
ine n |
Ju | ior n |
Se | ior n |
Me zza |
ine n |
Ju | ior n |
|
| Ty f s i t ise d a t / p e o ec ur ss e Ex p os ure |
Ca ing rry t am ou n |
Im ir p a t me n los /re ses l ve rsa |
Ca ing rry t am ou n |
Im ir p a t me n los /re ses l ve rsa |
Ca ing rry t am ou n |
Im ir p a t me n los /re ses l ve rsa |
Ne t e x p os ure |
Im ir p a t me n los /re ses l ve rsa |
Ne t e x p os ure |
Im ir p a t me n los /re ses l ve rsa |
Ne t e x p os ure |
Im ir p a t me n los /re ses l ve rsa |
Ne t e x p os ure |
Im ir p a t me n los /re ses l ve rsa |
Ne t e x p os ure |
Im ir p a t me n los /re ses l ve rsa |
Ne t e x p os ure |
Im ir p a t me n los /re ses l ve rsa |
| A. Fu l ly de ise d rec og n |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| t ty as se p e - |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| B. Pa t ly de ise d r rec og n |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| t ty as se p e - |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| C. No de ise d t rec og n |
- | - | - | - | 3 9 6. 3 6 |
1 - |
- | - | - | - | - | - | - | - | - | - | - | - |
| for ing loa no n-p er m ns - |
||||||||||||||||||
| to tom cu s ers |
- | - | - | - | 3 3 4 |
- | - | - | - | - | - | - | - | - | - | - | - | - |
| for ing loa p er m ns - to tom cu s ers |
- | - | - | - | 3 9 6. 0 2 7 |
- | - | - | - | - | - | - | - | - | - | - | - | - |
C.3 Banking group - Interests in special purpose vehicles for the securitisation
| Se / i t isa t ion cu r na me |
As ts se |
ia b i l i ies L t |
||||||
|---|---|---|---|---|---|---|---|---|
| ia l p h ic le sp ec urp os e v e |
Re is ter d o f f ice g e |
Co l i da t ion ns o |
Lo d r iva b les an s a n ec e |
De b t s i- t ec ur ies |
O t he rs |
Se ior n |
Me ine zza n |
Ju ior n |
| I F I S A B C P Pro S.r l. g ram me |
Co l ian ( Pro inc f Tre iso ) ne g o e o v v |
1 0 0 % |
1. 3 8 0. 9 2 9 |
- | 1 6 7 5. 7 |
9 4 6. 2 6 1 |
- | - |
| In d ig Lo S.r l. o an |
Co l ian ( Pro inc f Tre iso ) ne g o v e o v |
1 0 0 % |
3 9 5. 1 7 7 |
- | 5 8. 5 1 7 |
1 8 8. 1 0 0 |
- | 2 2 7. 2 0 0 |
| In d ig Le S.r l. o as e |
Co l ian ( Pro inc f Tre iso ) ne g o v e o v |
1 0 0 % |
4 5 1. 4 0 0 |
- | 4 6. 8 4 4 |
3 6 6. 3 0 0 |
- | 1 3 8. 0 0 0 |
| Securitisation name/ special purpose vehicle |
Registered office | % stake |
|---|---|---|
| IFIS ABCP Programme S.r.l. | Conegliano (Province of Treviso) | 0% |
| Indigo Loan S.r.l. | Conegliano (Province of Treviso) | 0% |
| Indigo Lease S.r.l. | Conegliano (Province of Treviso) | 0% |
During 2014, Banca IFIS bought a property in Florence to be renovated for 9,6 million Euro. It plans to move the NPL area's offices there. At the same time, the Bank sold a finance lease agreement concerning the property currently housing the NPL Area to a newco, a special purpose vehicle set up exclusively to manage said property and owned by a real estate company not related to the Banca IFIS Group.
Following the sale of the lease agreement, Banca IFIS is jointly liable for the settlement of the relevant lease payments. To hedge the risk of insolvency on the part of the newco, Banca IFIS obtained that it set up a 1 million Euro security deposit with the Bank as well as a lien on 99% of voting shares in the newco, to be exercised in the event the newco defaults on its obligations.
Pending completion of the renovation works, the Bank had entered into a lease agreement with the newco to continue using the offices for a rent essentially aligned with lease payments.
Following the completion of the renovation works, the lease agreement was terminated in October 2016.
In 2016, the newco regularly settled the lease payments due using the money raised from the leased property.
Since the sale of the lease agreement does not meet the requirements of IAS 39 for derecognising the financial liability, Banca IFIS continues to recognise the building under property, plant and equipment, and the relevant financial liability under payables due to customers.
| Items/ Type of struc tured entity |
Account ing portfo lios under assets |
Total assets (A) |
Accounting portfolios under liabil ities |
Total liabilities (B) |
Net book value (C=A B) |
Maximum ex posure to the risk of loss (D) |
Difference be tween exposure to the risk of loss and book value (E=D-C) |
|---|---|---|---|---|---|---|---|
| 1. Special purpose vehicle |
n.a. | - | Due to cus tomers |
553 | (553) | - | (553) |
The maximum risk of loss is zero, as can be seen from the qualitative information provided.
Financial assets sold but not derecognised refer to securitised receivables and Italian government bonds used for repurchase agreements. Those financial assets are recognised under available for sale financial assets, whereas financing for repurchase agreements is recognised under payables due to customers.
| Ty / p es Po fo l io t r |
F ina he l d |
ia l a nc for tra |
ts ss e d ing |
F ina t a |
ia l a nc fa ir v a |
ts ss e lue |
Av i la a f ina nc |
for b le sa ia l a ss e |
le ts |
He l d na |
to tur ma ia l a nc ss |
f i ty i ts e |
Du e |
fro ba m |
ks n |
cu | Lo to an s tom s ers |
To | ta l |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| A | B | C | A | B | C | A | B | C | A | B | C | A | B | C | A | B | C | 3 1 / 1 2 / 2 0 1 6 |
3 1 / 1 2 / 2 0 1 5 |
|
| A. On -ba lan he t ce -s e ts as se |
- | - | - | - | - | - | 3 2 3. 0 3 3 |
- | - | - | - | - | - | - | - | 9 2 7. 6 2 6 |
- | - | 1. 2 5 0. 6 5 9 |
- |
| 1. De b t s i t ies ec ur |
- | - | - | - | - | - | 3 2 3. 0 3 3 |
- | - | - | - | - | - | - | - | - | - | - | 3 2 3. 0 3 3 |
- |
| 2. Eq i ty i t ies u se cu r |
- | - | - | - | - | - | - | - | - | X | X | X | X | X | X | X | X | X | - | - |
| 3. U C I T S |
- | - | - | - | - | - | - | - | - | X | X | X | X | X | X | X | X | X | - | - |
| 4. Lo an s |
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 9 2 6 2 6 7. |
- | - | 9 2 6 2 6 7. |
- |
| B. De iva ive t r s |
- | - | - | X | X | X | X | X | X | X | X | X | X | X | X | X | X | X | - | - |
| To ta l 3 1. 1 2. 2 0 1 6 |
- | - | - | - | - | - | 3 2 3. 0 3 3 |
- | - | - | - | - | - | - | - | 9 2 7. 6 2 6 |
- | - | 1. 2 5 0. 6 5 9 |
X |
| f w h ic h n for o on -p er m |
X | |||||||||||||||||||
| ing | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 1. 3 7 3 |
- | - | 1. 3 7 3 |
|
| To ta l 3 1. 1 2. 2 0 1 5 |
- | - | - | - | - | - | 2. 6 6 7. 6 0 6 |
- | - | - | - | - | - | - | - | - | - | - | X | 2. 6 6 7. 6 0 6 |
| f w h ic h n for o on -p er m |
X | |||||||||||||||||||
| ing | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
Key:
A= Financial assets sold and fully recognised (book value)
B= Financial assets sold and partly recognised (book value)
C= Financial assets sold and partly recognised (full value)
Generally, as the Banca IFIS Group does not usually trade in financial instruments, its financial risk profile refers mainly to the banking book. The activity of purchasing bonds, given that these are classified under Available for Sale and Loans and Receivables, falls within the scope of the banking book and does not, therefore, constitute new market risks.
At the end of 2016, the Group recognised currency swaps with a mark-to-market value positive to the tune of 397 thousand Euro and negative to the tune of 2.031 thousand Euro. The classification of these derivatives under financial assets held for trading does not reflect the aim of the transaction, which is to mitigate the impact of potential fluctuations in the reference exchange rates.
Concerning Interbanca alone, during 2016, in line with internal policies forbidding any kind of trading for speculative purposes, the trading book consisted entirely of residual transactions from Corporate Desk operations (discontinued in 2009), in which clients were offered derivative contracts hedging the financial risks they assumed. In order to remove market risk, all outstanding transactions are hedged with "back to back" trades, in which the Bank assumes a position opposite to the one sold to corporate clients with independent market counterparties.
The Banca IFIS Group does not usually trade in financial instruments.
A. General aspects, management procedures and measurement methods concerning the interest rate risk and the price risk
As a general principle, the Group does not assume significant interest rate risks. Following the acquisition of the former GE Capital Interbanca Group, the main funding source is still the online savings account rendimax, wwhich is complemented by collateralised or non-collateralised interbank funding. Customer deposits on the rendimax and contomax products are at a fixed rate for the fixed-term part, while on demand and call deposits are at a non-indexed floating rate the Bank can unilaterally revise without prejudice to legal and contractual provisions. The Bank launched three securitisation programmes in the year just ended: one with underlying the factoring portfolio, one with underlying the leasing portfolio, and one with underlying the corporate portfolio. The first is a three-year revolving programme, the other two are amortizing programmes.
At the end of 2016, Banca IFIS acquired the former GE Capital Interbanca Group and expanded its core business to corporate lending, structured finance, and finance and operating leases. Loans to customers are still largely at floating rate.
As for the operations concerning distressed retail loans (carried out by the NPL Area), for which the business model focuses on acquiring receivables at prices lower than their book value, there is a potential interest rate risk associated with the uncertainty about when the receivables will be collected. The variability in the loan's term, which to all intents and purposes can be considered at a fixed rate, is particularly
important with reference to tax receivables, the overall par value of which is highly likely to be collected, although in the medium/long term. In this context, and in order to effectively mitigate interest rate risk, it is particularly important to correctly assess the transaction during the initial acquisition stage. At 31 December 2016, approximately 14% of the bond portfolio consisted of inflation-indexed bonds. The remainder consisted of fixed-rate short-term bonds. The average duration of the overall portfolio is approximately eleven months.
The interest rate risk associated with funding operations carried out by the Parent Company's Treasury Department is assumed according to the limits and policies set by the Board of Directors, with precise delegations of power limiting the autonomy of those authorised to operate within the Bank's Treasury Department.
The business functions responsible for ensuring interest rate risk is managed correctly are: the Treasury Department, which directly manages funding operations and the bond portfolio; the Risk Management function, responsible for selecting the most appropriate risk indicators and monitoring assets and liabilities with reference to pre-set limits; and, lastly, the Top Management, which every year shall make proposals to the Board regarding policies on lending, funding and the management of interest rate risk, as well as suggest appropriate actions during the year in order to ensure that operations are conducted consistently with the risk policies approved by the Bank.
As part of current operations and based on funding indications from the Treasury Department, as well as interest rate forecasts and assessments of lending trends, the Top Management provides the Treasury Department—which monitors interest rate risk trends with reference to the natural mismatching between assets and liabilities—with guidelines on the use of available credit lines.
In order to monitor interest rate risk, the Top Management receives a daily summary on the overall cash position. Furthermore, the Risk Management function periodically reports to the Bank's Board of Directors on the interest rate risk position by means of a quarterly Dashboard prepared for the Bank's management. The Integrated Treasury System (SIT) provides further tools for assessing and monitoring the main interest rate-sensitive assets and liabilities.
The interest rate risk falls under the category of second-pillar risks. In the final document sent to the Supervisory Body, as per the relevant regulations (Circular 285 of 17 December 2013 – Title III, Chapter 1, Annex C), the Interest Rate Risk has been specifically measured in terms of capital absorption. In the face of the warning threshold of 20% of Regulatory Capital, the resulting risk indicator for the Banca IFIS Group (pre-acquisition of the former GE Capital Interbanca Group) was close to zero as at 30 September 2016.
In order to ensure Group-level monitoring and reporting, Banca IFIS has implemented an integration process to include Interbanca, IFIS Factoring Srl, IFIS Leasing Spa, and IFIS Rental Services Srl in the scope of analysis.
Considering the extent of the risk assumed, the Banca IFIS Group does not usually hedge interest rate risk.
As for the price risk, the Group does not generally assume risks associated with price fluctuations on financial instruments, as its business focuses on financing SMEs' working capital.
Classifying the bonds held under Available for sale financial assets gives rise to the risk that the Group's capital reserves could fluctuate as a consequence of the change in the bonds' fair value. Nonetheless,
this risk is relatively low, since the securities portfolio is now limited in size and given the high credit standing of the issuers and the short average duration of the portfolio.
The Risk Management function is responsible for monitoring the price risk that the Group assumes while conducting its business. Thanks to the Integrated Treasury System (SIT) and the contribution of the Risk Management Function, the Group can assess and monitor the operations of the treasury, providing appropriate tools for assessing price risks. Specifically, the SIT also allows to
There are no fair value hedges.
There are no cash flow hedges.
1. Banking book: distribution by residual duration (re-pricing date) of financial assets and liabilities - Currency: Euro
| Type/Residual life | on de | up to 3 | over 3 to | over 6 months |
over 1 to 5 | over 5 years to |
over 10 | Indefinite |
|---|---|---|---|---|---|---|---|---|
| mand | months | 6 months | to 1 year | years | 10 years | years | duration | |
| 1. On-balance-sheet assets | 1.549.960 | 708.118 | 360.449 | 565.387 | 526.723 | 195.187 | 11.938 | - |
| 1.1 Debt securities | - | - | 52.741 | 270.292 | - | - | - | - |
| - with early redemption | ||||||||
| option | - | - | - | - | - | - | - | - |
| - other | - | - | 52.741 | 270.292 | - | - | - | - |
| 1.2 Loans to banks | 95.327 | 301.644 | - | - | - | - | - | - |
| 1.3 Loans to customers | 1.454.633 | 406.474 | 307.708 | 295.095 | 526.723 | 195.187 | 11.938 | - |
| - current accounts | 49.868 | 6 | 624 | 238 | 14.331 | 3.928 | 128 | - |
| - other loans | 1.404.765 | 406.468 | 307.084 | 294.857 | 512.392 | 191.259 | 11.810 | - |
| - with early redemption | ||||||||
| option | 100.839 | 63 | 204 | 863 | 13 | - | - | - |
| - other | 1.303.926 | 406.405 | 306.880 | 293.994 | 512.379 | 191.259 | 11.810 | - |
| 2. On-balance-sheet liabilities | 1.011.538 | 1.507.281 | 220.938 | 399.284 | 1.538.602 | 1.053 | 1.909 | - |
| 2.1 Due to customers | 891.081 | 1.104.976 | 184.938 | 390.284 | 1.538.602 | 1.053 | 1.909 | - |
| - current accounts | 891.081 | 1.609.680 | 182.639 | 388.299 | 1.536.475 | - | - | - |
| - other payables | - | 504.704 | 2.299 | 1.985 | 2.127 | 1.053 | 1.909 | - |
| - with early redemption | ||||||||
| option | - | - | - | - | - | - | - | - |
| - other | - | 504.704 | 2.299 | 1.985 | 2.127 | 1.053 | 1.909 | - |
| 2.2 Due to banks | 120.457 | 402.305 | 36.000 | 9.000 | - | - | - | - |
| - current accounts | 120.457 | - | - | - | - | - | - | - |
| - other payables | - | 402.305 | 36.000 | 9.000 | - | - | - | - |
| 2.3 Debt securities | - | - | - | - | - | - | - | - |
| - with early redemption | - | - | - | - | - | - | - | - |
| option | ||||||||
| - other | - | - | - | - | - | - | - | - |
| 2.4 Other liabilities | - | - | - | - | - | - | - | - |
| - with early redemption | - | - | - | - | - | - | - | - |
| option | ||||||||
| - other | - | - | - | - | - | - | - | - |
| 3. Financial derivatives | - | - | - | - | - | - | - | - |
| 3.1 With underlying security | - | - | - | - | - | - | - | - |
| - Options | - | - | - | - | - | - | - | - |
| + long positions | - | - | - | - | - | - | - | - |
| + short positions | - | - | - | - | - | - | - | - |
| - Other | - | - | - | - | - | - | - | - |
| + long positions | - | - | - | - | - | - | - | - |
| + short positions 3.2 Without underlying security |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
| - Options | - | - | - | - | - | - | - | - |
| + long positions | - | - | - | - | - | - | - | - |
| + short positions | - | - | - | - | - | - | - | - |
| - Other | - | - | - | - | - | - | - | - |
| + long positions | - | - | - | - | - | - | - | - |
| + short positions | - | - | - | - | - | - | - | - |
| 4. Other off-balance-sheet | ||||||||
| transactions | - | - | - | - | - | - | - | |
| + long positions | - | - | - | - | - | - | - | |
| + short positions | - | - | - | - | - | - | - | - |
The assumption of currency risk, intended as an operating element that could potentially improve treasury performance, represents a speculative instrument: in principle, therefore, it is not part of the Group's policies. Banca IFIS's foreign currency operations largely involve collections and payments associated with factoring operations. In this sense, the advances in foreign currency granted to customers are generally hedged with deposits and/or loans from other banks in the same currency, thus eliminating for the most part the risk of losses associated with exchange rate fluctuations. In some cases, synthetic instruments are used as hedging instruments.
Concerning the foreign currency transactions carried out by the subsidiary Interbanca, they consists in medium/long-term loans (mostly in USD) for which the currency risk is neutralised right from their inception by securing funding denominated in the same currency. This funding is currently provided by the Parent Company Banca IFIS, which manages the consolidated net mismatching of the exposure related to said risk.
A residual currency risk arises as a natural consequence of the mismatch between the borrowers' drawdowns and the Treasury Department's funding operations in foreign currency. Such mismatches are mainly a result of the difficulty in correctly anticipating financial trends connected with factoring operations, with particular reference to cash flows from account debtors vis-à-vis the maturities of loans granted to customers, as well as the effect of interest on them.
However, the Treasury Department strives to minimise such mismatches every day, constantly realigning the size and timing of foreign currency positions.
Currency risk related to the Bank's business is assumed and managed according to the risk policies and limits set by the Parent Company's Board of Directors, with precise delegations of power limiting the autonomy of those authorised to operate, as well as especially strict limits on the daily net currency position.
The business functions responsible for ensuring the currency risk is managed correctly are: the Treasury Department, which directly manages the bank's funding operations and currency position; the Risk Management function, responsible for selecting the most appropriate risk indicators and monitoring them with reference to pre-set limits; and the Top Management, which every year shall make proposals to the Bank's Board of Directors regarding policies on funding and the management of currency risk, as well as suggest appropriate actions during the year in order to ensure that operations are conducted consistently with the risk policies approved by the Group.
Furthermore, the Risk Management function periodically reports to the Bank's Board of Directors on the currency risk position by means of a quarterly Dashboard prepared for the Bank's management.
The Group's expanding operations in Poland, through the subsidiary IFIS Finance, are no exception to the above approach: assets denominated in Zloty are financed through funding in the same currency.
With the acquisition of the Polish subsidiary, Banca IFIS has assumed the currency risk represented by the initial investment in IFIS Finance's share capital for an amount of 21,2 million Zloty and the subsequent share capital increase for an amount of 66 million Zloty.
Furthermore, Banca IFIS owns a 5,57% interest in India Factoring and Finance Solutions Private Limited, worth 20 million Indian rupees and with a market value of 3.044 thousand Euro at the historical exchange rate. As already mentioned, in 2015 the Bank tested said interest for impairment, recognising a 2,4 million Euro charge in profit or loss. In 2016, the fair value was revalued by 193,4 thousand Euro through equity, bringing the value of the equity interest to 864,6 thousand Euro.
Considering the size of this investment, the Bank did not deem it necessary to hedge the ensuing currency risk.
| Currencies | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Items | US DOLLAR | POUND STERLING |
JAPANESE YEN |
CANADIAN DOLLAR |
SWISS FRANC |
OTHER CUR RENCIES |
|||
| A. Financial assets | 212.521 | 1.313 | 4 | 39 | 4 | 62.521 | |||
| A.1 Debt securities | |||||||||
| A.2 Equity securities | |||||||||
| A.3 Loans to banks | 169.802 | 87 | 4 | 38 | 0 | 9.546 | |||
| A.4 Loans to customers | 42.719 | 1.226 | 0 | 1 | 4 | 52.975 | |||
| A.5 Other financial assets | |||||||||
| B. Other assets | 95 | ||||||||
| C. Financial liabilities | 65.333 | 514 | 20 | 0 | 164 | 6.944 | |||
| C.1 Due to banks | 63.693 | 504 | 20 | 0 | 164 | 6.105 | |||
| C.2 Due to customers | 1.638 | 10 | 0 | 0 | 0 | 839 | |||
| C.3 Debt securities | 0 | ||||||||
| C.4 Other financial liabilities | 2 | 0 | 0 | 0 | 0 | 0 | |||
| D. Other liabilities | 565 | ||||||||
| E. Financial derivatives | 132.114 | 0 | 0 | 0 | 0 | 27.178 | |||
| - Options | 0 | 0 | 0 | 0 | 0 | 0 | |||
| + long positions | |||||||||
| + short positions | |||||||||
| - Other | 132.224 | 0 | 0 | 0 | 0 | 27.201 | |||
| + long positions | 10 | 399 | |||||||
| + short positions | 132.234 | 0 | 0 | 0 | 0 | 27.600 | |||
| Total assets | 212.529 | 1.314 | 4 | 38 | 4 | 63.014 | |||
| Total liabilities | 197.564 | 514 | 20 | 0 | 164 | 35.108 | |||
| Unbalance (+/-) | 14.965 | 800 | 16 | 38 | 159 | 27.906 |
The Banca IFIS Group does not trade in financial derivatives on behalf of third parties and limits proprietary trading to instruments hedging against market risk.
Banca IFIS often uses financial derivatives to hedge currency exposures. At 31 December 2016, the Bank recognised foreign exchange derivatives with a positive fair value of 397 thousand euro and a negative fair value of 2031 thousand euro. As for the transactions entered into, it should be noted that the Group never undertakes speculative transactions.
Concerning Interbanca alone, during 2016, in line with internal policies forbidding any kind of trading for speculative purposes, the trading book—totalling 47,0 million Euro—consisted entirely of residual transactions from Corporate Desk operations (discontinued in 2009), in which clients were offered derivative
contracts hedging the financial risks they assumed. In order to remove market risk, all outstanding transactions are hedged with "back to back" trades, in which the Bank assumes a position opposite to the one sold to corporate clients with independent market counterparties, resulting in 46,4 million Euro in liabilities held for trading.
| 31.12.2016 | 31.12.2015 | |||||
|---|---|---|---|---|---|---|
| Underlying assets/ type of derivatives |
Over the counter | Central counterparts |
Over the counter | Central counterparts |
||
| 1. Debt securities and interest rates | 419.297 | - | - | - | ||
| a) Options | 21.168 | - | - | - | ||
| b) Swaps | 398.129 | - | - | - | ||
| c) Forwards | - | - | - | - | ||
| d) Futures | - | - | - | - | ||
| e) Other | - | - | - | - | ||
| 2. Equity instruments and share in | 30.091 | - | - | - | ||
| dexes a) Options |
30.091 | - | - | - | ||
| b) Swaps | - | - | - | - | ||
| c) Forwards | - | - | - | - | ||
| d) Futures | - | - | - | - | ||
| e) Other | - | - | - | - | ||
| 3. Currencies and gold | 157.946 | - | 36.500 | - | ||
| a) Options | - | - | - | - | ||
| b) Swaps | 157.946 | - | 36.500 | - | ||
| c) Forwards | - | - | - | - | ||
| d) Futures | - | - | - | - | ||
| e) Other | - | - | - | - | ||
| 4. Goods | - | - | - | - | ||
| 5. Other underlying assets | - | - | - | - | ||
| Total | 607.334 | - | 36.500 | - |
| Positive fair value | ||||||||
|---|---|---|---|---|---|---|---|---|
| 31.12.2016 | 31.12.2015 | |||||||
| Underlying assets/type of derivatives | Over the counter | Central counterparts |
Over the counter | Central counterparts |
||||
| A. Supervisory trading book | 40.282 | - | -259 | - | ||||
| a) Options | - | - | - | - | ||||
| b) Interest rate swaps | 39.885 | - | - | - | ||||
| c) Cross currency swaps | 397 | - | 259 | - | ||||
| d) Equity swaps | - | - | - | - | ||||
| e) Forwards | - | - | - | - | ||||
| f) Futures | - | - | - | - | ||||
| g) Other | - | - | - | - | ||||
| B. Hedging banking book | - | - | - | - | ||||
| a) Options | - | - | - | - | ||||
| b) Interest rate swaps | - | - | - | - | ||||
| c) Cross currency swaps | - | - | - | - | ||||
| d) Equity swaps | - | - | - | - | ||||
| e) Forwards | - | - | - | - | ||||
| f) Futures | - | - | - | - | ||||
| g) Other | - | - | - | - | ||||
| C. Banking book - other derivatives | - | - | - | - | ||||
| a) Options | - | - | - | - | ||||
| b) Interest rate swaps | - | - | - | - | ||||
| c) Cross currency swaps | - | - | - | - | ||||
| d) Equity swaps | - | - | - | - | ||||
| e) Forwards | - | - | - | - | ||||
| f) Futures | - | - | - | - | ||||
| g) Other | - | - | - | - | ||||
| Total | 40.282 | - | 259 | - |
| Negative fair value | ||||||||
|---|---|---|---|---|---|---|---|---|
| 31.12.2016 | 31.12.2015 | |||||||
| Underlying assets/type of derivatives | Over the counter | Central counterparts |
Over the counter | Central counterparts |
||||
| A. Supervisory trading book | 48.478 | - | 21 | - | ||||
| a) Options | - | - | - | - | ||||
| b) Interest rate swaps | 46.447 | - | - | - | ||||
| c) Cross currency swaps | 2.031 | - | 21 | - | ||||
| d) Equity swaps | - | - | - | - | ||||
| e) Forwards | - | - | - | - | ||||
| f) Futures | - | - | - | - | ||||
| g) Other | - | - | - | - | ||||
| B. Hedging banking book | - | - | - | - | ||||
| a) Options | - | - | - | - | ||||
| b) Interest rate swaps | - | - | - | - | ||||
| c) Cross currency swaps | - | - | - | - | ||||
| d) Equity swaps | - | - | - | - | ||||
| e) Forwards | - | - | - | - | ||||
| f) Futures | - | - | - | - | ||||
| g) Other | - | - | - | - | ||||
| C. Banking book - other derivatives | - | - | - | - | ||||
| a) Options | - | - | - | - | ||||
| b) Interest rate swaps | - | - | - | - | ||||
| c) Cross currency swaps | - | - | - | - | ||||
| d) Equity swaps | - | - | - | - | ||||
| e) Forwards | - | - | - | - | ||||
| f) Futures | - | - | - | - | ||||
| g) Other | - | - | - | - | ||||
| Total | 48.478 | - | 21 | - |
A.5 Financial derivatives: supervisory trading book: notional values, gross positive and negative fair value by counterparty - contracts not included in netting agreements
| Contracts not included in netting agreements |
Governments and Central banks |
Other public entities | Banks | Financial institutions | Insurance companies | Non-financial companies | Other entities |
|---|---|---|---|---|---|---|---|
| 1) Debt securities and interest rates | |||||||
| - notional amount | - | - | 233.792 | 22.357 | - | 163.148 | - |
| - positive fair value | - | - | 3.936 | 11.110 | - | 24.839 | - |
| - negative fair value | - | - | 46.447 | - | - | - | - |
| - future exposure | - | - | 1.682 | 112 | - | 1.357 | - |
| 2) Equity instruments and share in dexes |
|||||||
| - notional amount | - | - | - | - | - | 30.091 | - |
| - positive fair value | - | - | - | - | - | - | - |
| - negative fair value | - | - | - | - | - | - | - |
| - future exposure | - | - | - | - | - | 75 | - |
| 3) Currencies and gold | |||||||
| - notional amount | - | - | 157.946 | - | - | - | - |
| - positive fair value | - | - | 397 | - | - | - | - |
| - negative fair value | - | - | 2.031 | - | - | - | - |
| - future exposure | - | - | 275 | - | - | - | - |
| 4) Other amounts | |||||||
| - notional amount | - | - | - | - | - | - | - |
| - positive fair value | - | - | - | - | - | - | - |
| - negative fair value | - | - | - | - | - | - | - |
| - future exposure | - | - | - | - | - | - | - |
| Underlying assets/Residual life | Up to 1 year | Over 1 to 5 years |
Over 5 years | Total |
|---|---|---|---|---|
| A. Supervisory trading book | 207.898 | 269.107 | 130.329 | 607.334 |
| A.1 Financial derivatives on debt securities and interest rates | 49.952 | 239.016 | 130.329 | 419.297 |
| A.2 Financial derivatives on equity instruments and share indexes | - | 30.091 | - | 30.091 |
| A.3 Financial derivatives on exchange rates and gold | 157.946 | - | - | 157.946 |
| A.4 Financial derivatives on other values | - | - | - | - |
| B. Banking book | - | - | - | - |
| B.1 Financial derivatives on debt securities and interest rates | - | - | - | - |
| B.2 Financial derivatives on equity instruments and share indexes | - | - | - | - |
| B.3 Financial derivatives on exchange rates and gold | - | - | - | - |
| B.4 Financial derivatives on other values | - | - | - | - |
| Total 31.12.2016 | 207.898 | 269.107 | 130.329 | 607.334 |
| Total 31.12.2015 | 36.500 | - | - | 36.500 |
The liquidity risk refers to the possibility that the Group fails to service its debt obligations due to the inability to raise funds or sell enough assets on the market to address the financial deficit. The liquidity risk also refers to the inability to secure new adequate financial resources, in terms of amount and cost, to meet its operating needs and opportunities, hence forcing the Group to either slow down or stop its operations, or incur excessive funding costs in order to service its obligations, significantly affecting its profitability.
Financial resources are represented by equity, on-line funding from retail customers, and funding operations carried out on the domestic and international interbank market as well as with the Eurosystem. Following the acquisition of the former GE Capital Interbanca Group, the Group's core business now includes Corporate lending, structured finance, and finance and operating leases—which are all mediumterm operations. Factoring operations concern short- or very short-term trade receivables (normally not exceeding 6 months, excluding receivables due from the Public Administration, with average collection periods usually up to 12 months).
With reference to the Group's operations concerning the NPL Area and the purchases of tax receivables arising from insolvency proceedings, the characteristics of the business model imply a high level of variability concerning both the amount collected and the date of actual collection. Therefore, the timely and careful management of cash flows is particularly important. To ensure expected cash flows are correctly assessed, also with a view to correctly pricing the transactions undertaken, the Group carefully monitors the trend in collections compared to expected flows.
The Banca IFIS Group has always secured financial resources more than adequate for its needs thanks to its wide and diverse interbank relationships, the market's positive response to its on-line funding source, the presence of a portfolio of bonds eligible for Repo transactions, and the type and quality of its assets.
During the period, the Bank pursued particularly prudent financial policies aimed at favouring funding stability. This policy, which affects the economic efficiency of treasury management, in terms of the rate spread between interbank funding and lending, to guarantee certain and stable liquidity, is adequately supported by the profitability of the Group's operations.
At the moment, the available financial resources are adequate for current and future business volumes. Nonetheless, the Group is constantly striving to improve the state of its financial resources, in terms of both size and cost.
The Parent Company's business functions responsible for ensuring that liquidity policies are properly implemented are: the Treasury Department, which directly manages liquidity; the Risk Management function, responsible for selecting the most appropriate risk indicators and monitoring them with reference to pre-set limits; and the Top Management, which every year, aided by the Financial Office, shall make proposals to the Bank's Board of Directors regarding policies on funding and the management of liquidity risk, as well as suggest appropriate actions during the year in order to ensure that operations are conducted consistently with the risk policies approved by the Group.
As for its own direct operations, the Bank has adopted a model for analysing and monitoring present and future liquidity positions as an additional element systematically supporting the Top Management's and the Board of Directors' decisions concerning liquidity. The results of periodic analyses carried out under both normal and stress market conditions are reported directly to the Supervisory Body.
In order to ensure Group-level monitoring and reporting, Banca IFIS has implemented an integration process to include Interbanca, IFIS Factoring, IFIS Leasing, and IFIS Rental Services in the scope of analysis—even though IFIS Rental Services is not included in the supervisory scope.
In compliance with supervisory provisions, the Bank also has a Contingency Funding Plan aimed at protecting the banking Group from losses or threats arising from a potential liquidity crisis and guaranteeing business continuity even in the midst of a serious emergency arising from its own internal organisation and/or the market situation.
Furthermore, the Risk Management function periodically reports to the Bank's Board of Directors on the liquidity risk position by means of a Dashboard prepared for the Bank's management.
With reference to the Polish subsidiary, treasury operations are co-ordinated by Banca IFIS's Treasury Department, in accordance with the Group's policies. If needed, the Bank may intervene directly in the subsidiary's favour.
As part of the continuous process of updating internal procedures, and taking into account the changes in the relevant prudential regulations, the Bank has implemented a Group liquidity risk governance and management system.
1. Distribution by residual contractual duration of financial assets and liabilities - Currency: Euro
| Items/Duration | on de mand |
over 1 day to 7 |
over 7 days to |
over 15 days to 1 |
over 1 month to |
over 3 to 6 months |
over 6 months to |
over 1 to 5 years |
Over 5 years |
indefi nite life |
|---|---|---|---|---|---|---|---|---|---|---|
| days | 15 days | month | 3 months | 1 year | ||||||
| On-balance-sheet assets | 869.555 | 114.012 | 103.900 | 397.521 | 122.745 | 512.131 | 792.604 | 1.383.759 | 49.568 | 1.069.8 |
| A.1 Government bonds | - | - | - | - | - | 427 | 270.719 | 80.000 | - | 31- |
| A.2 Other debt securities | - | - | - | - | - | - | 6 | - | - | 0 |
| A.3 UCITS units | 3.939 | - | - | - | - | - | - | - | - | - |
| A.4 Loans | 865.616 | 114.012 | 103.900 | 397.521 | 122.745 | 511.704 | 521.879 | 1.303.759 | 49.568 | 1.069.8 31 |
| - banks | 168.886 | 18.026 | 2.505 | 952 | 705.809 | 22.762 | 547 | 11.264 | 1.277 | 1.063.8 31 |
| - customers | 696.730 | 95.986 | 101.395 | 396.569 | 828.554 | 488.942 | 521.332 | 1.292.495 | 50.845 | 6.000 |
| On-balance-sheet liabilities | 992.505 | 49.467 | 62.088 | 365.535 | 1.862.906 | 259.947 | 420.445 | 1.758.178 | 5.591 | - |
| B.1 Deposits and current ac | ||||||||||
| counts | 990.076 | 48.930 | 62.088 | 365.523 | 1.541.669 | 259.288 | 420.307 | 1.539.245 | 2.112 | - |
| - banks | 49.733 | 97 | 2.856 | 261.089 | 88.551 | 36.195 | 9.082 | - | - | - |
| - customers | 940.343 | 48.833 | 59.232 | 104.434 | 1.453.118 | 223.093 | 411.225 | 1.539.245 | 2.112 | - |
| B.2 Debt securities | 395 | 4 | - | - | 13 | 67 | 65 | 247.941 | - | - |
| B.3 Other liabilities | 2.034 | 533 | - | 12 | 321.224 | 592 | 73 | 29.008 | 3.479 | - |
| Off-balance-sheet transac | ||||||||||
| tions | 117.044 | - | - | 121.691 | 193.317 | 69.141 | 15.602 | 31.637 | 17.572 | - |
| C.1 Financial derivatives with | ||||||||||
| exchange of underlying assets | - | - | - | 65.952 | 189.940 | 60.000 | - | 0 | - | - |
| - long positions | - | - | - | 32.976 | 94.970 | 30.000 | - | 0 | - | - |
| - short positions | - | - | - | 32.976 | 94.970 | 30.000 | - | - | - | - |
| C.2 Financial derivatives without | ||||||||||
| exchange of underlying assets | 86.332 | - | - | - | - | - | - | - | - | - |
| - long positions | 39.885 | - | - | - | - | - | - | - | - | - |
| - short positions | 46.447 | - | - | - | - | - | - | - | - | - |
| C. 3 Deposits and loans to be | ||||||||||
| received | - | - | - | - | - | - | - | - | - | - |
| - long positions | - | - | - | - | - | - | - | - | - | - |
| - short positions | - | - | - | - | - | - | - | - | - | - |
| C. 4 Irrevocable loan commit | ||||||||||
| ments | 30.712 | - | - | 55.739 | 3.377 | 9.141 | 15.602 | 31.637 | 17.572 | - |
| - long positions | 7.501 | - | - | - | 3.377 | 9.141 | 15.602 | 31.637 | 17.572 | - |
| - short positions | 23.211 | - | - | 55.739 | - | - | - | - | - | - |
| C.5 financial guarantees granted | - | - | - | - | - | - | - | - | - | - |
| C.6 financial guarantees granted | - | - | - | - | - | - | - | - | - | - |
| C.1 Credit derivatives with ex | ||||||||||
| change of underlying assets | - | - | - | - | - | - | - | - | - | - |
| - long positions | - | - | - | - | - | - | - | - | - | - |
| - short positions | - | - | - | - | - | - | - | - | - | - |
| C.8 Credit derivatives without | ||||||||||
| exchange of underlying assets | - | - | - | - | - | - | - | - | - | - |
| - long positions | - | - | - | - | - | - | - | - | - | - |
| - short positions | - | - | - | - | - | - | - | - | - | - |
On 25 January 2011, Toscana Finanza's Board of Directors resolved to implement a securitisation programme for non-performing loans pursuant to Italian Law 130 of 30 April 1999 in order to optimise the operational and economic management of part of its financial receivables portfolio.
The operation concerned non-performing banking loans identifiable in block and largely backed by mortgages for an overall par value of around 33,7 million Euro.
The special purpose vehicle, Giglio SPV Srl, issued floating-rate asset-backed securities that were wholly underwritten by the merged company Toscana Finanza S.p.A., which was given a specific subservicing mandate for the collection and management of the receivables.
It should be noted that, pursuant to the terms and conditions of the operation, there is no substantial transfer of all the risks and rewards relating to the transferred assets (receivables).
As for the securitisations conducted in late 2016 and their purpose, see the comments in the section on credit risks.
Considering the goals it pursues and the technical aspects of the securitisation described above, the Banca IFIS Group faces no exposure or risks arising from the trading or holding of structured credit products, whether carried out directly or through unconsolidated special purpose vehicles or entities. In particular, it is important to stress that the securitisation has not removed any risk from the Group's total assets, since the derecognition requirements set by IAS 39 were not met. Meanwhile, the underwriting of the securities arising from the securitisation has not added any risk nor changed the presentation of the assets involved in the securitisation in the financial statements compared to the past. With reference to the Recommendation set out in the Report of the Financial Stability Forum of 7 April 2008, Appendix B, we can state that there are no exposures to instruments deemed highly risky by the market or implying a risk greater than previously expected.
Operational risk is the risk of losses arising from inadequate or dysfunctional processes, human resources, internal systems or external events. This definition does not include strategic risk and reputational risk, but it does include legal risk (i.e. the risk of losses deriving from failure to comply with laws or regulations, contractual or extra-contractual liability, or other disputes), IT risk, risk of non-compliance, risk of money laundering and terrorist financing, and the risk of financial misrepresentation.
The main sources of operational risk are operational errors, inefficient or inadequate operational processes and controls, internal and external frauds, the outsourcing of business functions, the quality of physical and logical security, inadequate or unavailable hardware or software systems, the growing reliance on automation, staff below strength relative to the size of the business, and inadequate human resources management and training policies.
The Banca IFIS Group has adopted for a while now—consistently with the relevant regulatory provisions and industry best practices—an operational risk management framework. This consists in a set of rules, procedures, resources (human, technological and organisational), and controls aiming to identify, assess, monitor, prevent or mitigate all existing or potential operational risks in the various organisational units, as well as to communicate them to the competent levels. The key processes for properly managing operational risks are the Loss Data Collection and Risk Self Assessment.
During 2016, the Risk Management further consolidated the Loss Data Collection process through constant efforts to disseminate a culture of pro-actively managing operational risks among the various structures, and therefore to raise awareness about the Loss Data Collection process. In addition, in 2016 the Bank defined and launched specific mitigating measures to bolster operational risk controls. These measures were based on the evidence gathered from the Loss Data Collection and Risk Self Assessment processes, which allowed to identify the main operational problems and therefore establish the most appropriate mitigating measures.
As for the Companies of the Banca IFIS Group:
To calculate capital requirements against operational risks, the Group adopted the Basic Indicator Approach.
There were no significant risks for the remaining consolidated companies that are not part of the Banking Group other than those disclosed in the section about the Banking Group.
Managing equity concerns a set of policies and decisions necessary to establish capital levels that are consistent with the assets and risks taken by the bank. The Banca IFIS Group is subject to the capital adequacy requirements established by the so-called Basel Committee (CRR/CRD IV).
The Board of Directors constantly monitors that the Bank meets the minimum supervisory requirements, and therefore the capital adequacy ratios, as well as complies with the capital limits set out in the Risk Appetite Framework (RAF).
Furthermore, also in accordance with the European Central Bank's recommendation of 28 January 2015, the Bank ensures compliance with capital adequacy ratios through a pay-out policy linked to the achievement of the above minimum capital requirements, as well as the careful assessment of the potential impact of extraordinary financial operations (share capital increases, convertible loans, etc.).
The Group's capital adequacy is further assessed and monitored every time an extraordinary operation is planned. In these cases, based on available information regarding said operations, the Banca IFIS Group estimates the impact on capital adequacy ratios as well as the RAF, and considers any measures necessary to meet the requirements.
At 31 December 2015, the bank held 739.446 treasury shares recognised at a market value of 5,8 million Euro and a par value of 739.446 Euro.
During 2016 Banca IFIS made the following transactions on treasury shares:
The remaining balance at the end of the year was 380.151 treasury shares with a market value of 3,2 million Euro and a par value of 380.151 Euro.
| Equity items | Banking group | companies Insurance |
Other compa nies |
eliminations & Consolidation adjustments |
31.12.2016 |
|---|---|---|---|---|---|
| Share capital | 53.811 | - | - | - | 53.811 |
| Share premiums | 101.776 | - | - | - | 101.776 |
| Reserves | 383.835 | - | - | - | 383.835 |
| Prepayments on dividends | - | - | - | - | - |
| Equity instruments | - | - | - | - | - |
| (Treasury shares) | (3.187) | - | - | - | (3.187) |
| Valuation reserves: | - | - | - | (5.445) | |
| - Available for sale financial assets |
- | - | - | 1.534 | |
| - Property, plant and equipment |
- | - | - | - | |
| - Intangible assets |
- | - | - | - | - |
| - Foreign investment hedges |
- | - | - | - | - |
| - Cash flow hedges |
- | - | - | - | - |
| - Exchange differences |
(6.856) | - | - | - | (6.856) |
| - Non-current assets under disposal |
- | - | - | - | - |
| - Actuarial gains (losses) on defined benefit plans |
- | - | - | (123) | |
| - Share of valuations reserves of equity-accounted investments |
- | - | - | - | |
| - Specific revaluation laws |
- | - | - | - | - |
| Profit (loss) for the year (+/-) of the Group and minority interests | 687.993 | - | - | - | 687.993 |
| Equity | 1.218.783 | - | - | - | 1.218.783 |
| Banking group | Insurance com panies |
Consolidation Other companies eliminations & 31.12.2016 adjustments |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Assets/Amounts | Positive reserve | Negative reserve | Positive reserve | Negative reserve | Positive reserve | Negative reserve | Positive reserve | Negative reserve | Positive reserve | Negative reserve |
| 1. Debt securities | 938 | - | - | - | - | - | - | 938 | - | |
| 2. Equity securities | 597 | (1) | - | - | - | - | - | - | 597 | (1) |
| 3. UCITS units | - | - | - | - | - | - | - | - | - | - |
| 4. Loans | - | - | - | - | - | - | - | - | - | - |
| Total 31.12.2016 | 1.535 | (1) | - | - | - | - | - | - | 1.535 | (1) |
| Total 31.12.2015 | 11.678 | (1) | - | - | - | - | - | - | 11.678 | (1) |
| Debt securi ties |
Equity securi ties |
UCITS units | Loans | |
|---|---|---|---|---|
| 1. Opening balance |
11.678 | (1) | - | - |
| 2. Increases |
2.081 | 597 | - | - |
| 2.1 Fair value gains |
182 | 597 | - | - |
| 2.2 Reclassification to profit or loss of negative reserves: |
- | - | - | - |
| - from impairment losses | - | - | - | - |
| - from realisation | - | - | - | - |
| 2.3 Other changes |
1.899 | - | - | - |
| 3. Reductions |
12.821 | - | - | - |
| 3.1 Fair value losses |
7.539 | - | - | - |
| 3.2 Impairment losses |
- | - | - | - |
| 3.3 Reclassification to profit or loss of positive reserves: |
5.282 | - | - | - |
| - from realisation | 5.282 | - | - | - |
| 3.4 Other changes |
- | - | - | - |
| 4. Closing balance |
938 | 596 | - | - |
Consolidated own funds, risk-weighted assets and solvency ratios at 31 December 2016 were determined based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013.
Article 19 of the CRR requires to include the unconsolidated holding of the banking group in prudential consolidation.
The consolidated own funds and capital ratios refer to the Banca IFIS Group including Interbanca (formerly GE Capital Interbanca).
The measures concerning own funds provide for the gradual phase-in of a new regulatory framework, with a transitional period lasting until 2017 during which some elements that will be accounted for or deducted in full once the provisions become effective will have only a limited impact.
This item includes:
617,7 million Euro in other reserves, including retained earnings. Specifically, this item includes the 330.2 million Euro profit recognised under Own Funds pursuant to article 26 of the CRR, less 43,8 million Euro in dividends expected to be paid to the owners of the Parent;
other items of comprehensive income, negative to the tune of 2,7 million Euro and consisting of:
This item includes the following main aggregates:
E) Transitional regime - Impact on CET1 (+/-), including minority interests subject to transitional provisions
This item includes the following transitional adjustments:
G) Additional Tier 1 Capital (AT1) gross of items to be deducted and the effects of the transitional regime This item includes the minority interests included in AT1, amounting to 29,1 million Euro;
I) Transitional regime - Impact on AT1 (+/-), including instruments issued by subsidiaries that are given recognition in AT1 pursuant to transitional provisions
This item includes minority interests subject to transitional provisions eligible to be recognised in AT1, totalling 11,6 million Euro (-).
M) Tier 2 Capital (T2) gross of items to be deducted and the effects of the transitional regime
This item includes the minority interests included in T2, amounting to 38,7 million Euro;
O) Transitional regime - Impact on T2 (+/-), including instruments issued by subsidiaries that are given recognition in T2 pursuant to transitional provisions
This item includes minority interests subject to transitional provisions eligible to be recognised in T2, totalling 15,4 million Euro (-), and unrealised gains on AFS securities subject to transitional provisions eligible to be recognised in T2, totalling 0,08 million Euro (+)
| 31.12.2016 | 31.12.2015(1) | |
|---|---|---|
| A. Common Equity Tier 1 (CET1) before application of prudential filters | 1.089.430 | 430.284 |
| of which CET1 instruments subject to transitional provisions | - | - |
| B. CET1 prudential filters (+/-) | - | - |
| C. CET1 gross of items to be deducted and the effects of the transitional regime (A+/- B) |
1.089.430 | 430.284 |
| D. Items to be deducted from CET1 | 110.343 | 42.925 |
| E. Transitional regime - Impact on CET1 (+/-), including minority interests subject to transitional provisions |
52.076 | 76.957 |
| F. Total Common Equity Tier 1 (CET1) (C-D+/-E) | 1.031.163 | 464.316 |
| G. Additional Tier 1 Capital (AT1) gross of items to be deducted and the effects of the transitional regime |
29.072 | 24.100 |
| of which AT1 instruments subject to transitional provisions | - | - |
| H. Items to be deducted from AT1 | - | - |
| I. Transitional regime - Impact on AT1 (+/-), including instruments issued by subsidi aries that are given recognition in AT1 pursuant to transitional provisions |
(11.629) | (14.460) |
| L. Total Additional Tier 1 Capital (AT1) (G-H+/-I) | 17.443 | 9.640 |
| M. Tier 2 Capital (T2) gross of items to be deducted and the effects of the transitional regime |
38.744 | 32.133 |
| of which T2 instruments subject to transitional provisions | - | - |
| N. Items to be deducted from T2 | - | - |
| O. Transitional regime - Impact on T2 (+/-), including instruments issued by subsidiar ies that are given recognition in T2 pursuant to transitional provisions |
(15.421) | (19.280) |
| P. Total Tier 2 Capital (T2) (M-N+/-O) | 23.323 | 12.853 |
| Q. Total own funds (F+L+P) | 1.071.929 | 486.809 |
(1) Total consolidated own funds (amounting to 486.809 thousands Euro) differ from the amount reported in the consolidated financial statements for the year ended 31 December 2015 (501.809 thousands Euro) due to the 15 million Euro dividend payout approved by the Shareholders' Meeting of the parent company La Scogliera S.p.A. on 23 March 2016. The consolidated supervisory reports at 31 December 2015, as well as the relevant capital adequacy ratios, had already been adjusted at the end of March 2016 to account for said dividend payout. The data on consolidated Own Funds and capital adequacy ratios account for the impact of said distribution.
The prudential ratios at 31 December 2016 account for the adjustments required by the transitional provisions applying to the financial year 2016.
At 31 December 2016, Consolidated Own Funds totalled 1.071,9 million Euro, compared with 7.003,3 million Euro in risk-weighted assets, mainly because of credit and counterparty risks, as well as, to a lesser extent, operational and market risks.
As showed in the table on the breakdown of risk-weighted assets and prudential ratios, at 31 December 2016, the Banca IFIS Group had a CET1 capital ratio of 14,72%, a Tier1 capital ratio of 14,97%, and a Total capital ratio of 15,31%.
| Categories/Amounts | Non-weighted amounts | Weighted amounts / require ments |
|||
|---|---|---|---|---|---|
| 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | ||
| A. RISK ASSETS | |||||
| A.1 Credit risk and counterparty risk | |||||
| 1. Standardised approach | 9.248.594 | 7.139.747 | 6.192.897 | 2.704.228 | |
| 2. Internal rating method | - | - | - | - | |
| 2.1 Basic indicator approach | - | - | - | - | |
| 2.2 Advanced measurement approach | - | - | - | - | |
| 3. Securitisation programmes | - | - | - | - | |
| B. REGULATORY CAPITAL REQUIREMENTS | - | - | |||
| B.1 Credit risk and counterparty risk | 495.432 | 216.338 | |||
| B 2. Credit valuation adjustment risk | - | ||||
| B 3. Settlement risk | - | ||||
| B.4 Market risks | |||||
| 1. Standard method | 3.482 | 3.054 | |||
| 2. Internal models | - | ||||
| 3. Concentration risk | - | ||||
| B.5 Operational risk | |||||
| 1. Basic indicator approach | 59.010 | 41.735 | |||
| 2. Standardised approach | - | ||||
| 3. Advanced measurement approach | - | ||||
| B.6 Other calculation factors | - | ||||
| B.7 Total prudential requirements | 560.264 | 261.127 | |||
| C. RISK ASSETS AND CAPITAL REQUIREMENT RATIOS | - | ||||
| C.1 Risk-weighted assets | 7.003.305 | 3.264.088 | |||
| C.2 Common equity tier 1 capital / Risk-weighted assets (CET1 Capital ratio) | 14,72 | 14,22 (1) | |||
| C.2 Tier 1 Capital / Risk-weighted assets (Tier 1 capital ratio) | 14,97 | 14,52 (1) | |||
| C.4 Total own funds / Risk-weighted assets (Total capital ratio) | 15,31 | 14,91 (1) |
(1) Total consolidated own funds (amounting to 486.809 thousands Euro) differ from the amount reported in the consolidated financial statements for the year ended 31 December 2015 (501.809 thousands Euro) due to the 15 million Euro dividend payout approved by the Shareholders' Meeting of the parent company La Scogliera S.p.A. on 23 March 2016. The consolidated supervisory reports at 31 December 2015, as well as the relevant capital adequacy ratios, had already been adjusted at the end of March 2016 to account for said dividend payout. The data on consolidated Own Funds and capital adequacy ratios account for the impact of said distribution.
In November 2016, the Bank finalised the acquisition of the group headed by the former GE Capital Interbanca, which at 31 December 2016 was 99,993%-owned by the Banca IFIS Group. The company concerned and its subsidiaries operate in the following sectors: medium/long-term financing, structured financed, and operating and finance leases.
The acquisition was conducted by entering into a Share Purchase Agreement (SPA) on 28 July 2016 with GE Capital International Holdings Limited, and then a final sale on 30 November 2016 after obtaining the authorisation of the competent Supervisory Authorities on 29 November 2016.
Under IFRS 3, at the date of the business combination, the entity must identify the cost of the business combination and allocate it to the acquiree's identifiable assets, liabilities, and contingent liabilities at the acquisition date and measured at their fair values.
The cost of the acquisition of the GE Capital Interbanca Group was provisionally estimated at 119,2 million Euro (still gross of any additional adjustments to the price initially paid of 160 million Euro), as agreed: the cost is still subject to adjustments under the agreement with the seller.
Following the acquisition, in accordance with IASs/IFRSs, Banca IFIS conducted a Purchase Price Allocation (PPA), which consists in allocating the cost of the business combination, recognising the assets acquired, liabilities assumed, and contingent liabilities at their fair values at the acquisition date.
This phase of the allocation was based on a previous mapping of the assets and liabilities for which, considering all available information, significant differences between their fair value and carrying amount were deemed likely.
The consolidated assets and liabilities of the former GE Capital Interbanca Group at 30 November 2016 for which a difference between the carrying amount and fair value was found mainly referred to:
The fair value of in-scope individual loans to customers was estimated using the discounted cash flow method, i.e. by discounting the future cash flows from the position. The cash flows used are those in the Target's systems, without making any changes to their amount or payment schedule. To calculate the amount, Banca IFIS identified the interest rate of the individual exposure that represents the market expected return for exposures with similar duration and risk characteristics.
In order to apply the above method, loans to customers were segmented into portfolios by type. Here below are the details about the portfolios to which fair value adjustments were made following the fair valuation.
| Lending portfolio at 30 November 2016 FV measurement summary |
Performing | Non-perform ing past due |
Unlikely to pay |
Bad loans |
|---|---|---|---|---|
| Book value [A] | 960.461 | 1.635 | 301.734 | 104.246 |
| Full fair value [B] | 785.159 | 1.635 | 149.950 | 25.844 |
| Overall fair value adjustment [C=B-A] | (175.302) | - | (151.784) | (78.402) |
| CQS & Mortgage at 30 November 2016 FV measurement summary |
Performing | Non-perform ing past due |
Unlikely to pay |
Bad loans |
|---|---|---|---|---|
| Book value [A] | 159.605 | 6.943 | 18.800 | 11.667 |
| Full fair value [B] | 115.260 | 6.943 | 12.025 | 2.735 |
| Overall fair value adjustment [C=B-A] | (44.345) | - | (6.774) | (8.931) |
The tax assets and liabilities concerned consist of:
The remaining allocations of fair value concerning Provisions for Risks and Charges referred to unfunded commitments (undrawn loan commitments) related to non-performing exposures as well as higher provisions for disputes for which it is possible that a net outflow of resources will be required to settle the obligation. The fair value of lawsuits against the Group backed by specific guarantees covering all costs associated with a potential defeat in court was estimated to be zero, since, in accordance with IAS 37, the best estimate of the expenditure required to settle the present obligation (i.e. the expenditure the entity would incur) is zero based on the Bank's internal assessment. Consistently with IFRS3, the value of the related indemnification assets was estimated to be zero for the same reasons.
Finally, Banca IFIS did not identify any intangible assets (such as client relationships, brand names) from which it could expect future economic benefits and whose fair value could be estimated reliably. As for property, plant and equipment, and specifically buildings, the fair value is equal to the Target's carrying amount according to the appraisals carried out at the acquisition date.
Under IFRS3, the allocation of the cost of the business combination must be definitively quantified within 12 months of the acquisition date. At the reporting date, the allocation process is to be considered provisional, as the price is subject to adjustments under the agreement with the seller.
Here below is the carrying amount and fair value of the assets and liabilities acquired:
| SOFP Item | Description | Consolidated Interbanca Pre Acquisition |
Acquired assets and liabilities at fair value |
Fair value adjustments |
|---|---|---|---|---|
| Equity | 963 | 743 | (221) | |
| 10.AP | Cash and cash equivalents | 0 | 0 | - |
| 20.AP | Derivatives to customers | 50 | 50 | - |
| 40.AP | AFS | 64 | 64 | - |
| 60.AP | Due from banks | 241 | 241 | - |
| 70.AP | Loans to customers | 2.854 | 2.389 | (466) |
| 120.AP | Property, plant and equipment | 46 | 46 | - |
| 130.AP | Int. assets with indefinite useful life | - | - | - |
| 130.AP | Int. assets with finite useful life | 1 | 1 | - |
| 140.AP; 80.PP | Tax assets and liabilities | 248 | 499 | 251 |
| 160 AP | Other assets | 73 | 73 | - |
| 10.PP | Due to banks | (1.838) | (1.838) | - |
| 20.PP | Due to customers | (534) | (534) | - |
| 30.PP | Outstanding securities | (84) | (84) | - |
| 40.PP | Financial liabilities held for trading | (51) | (51) | - |
| 100.PP | Other liabilities | (79) | (79) | - |
| 110.PP | Post-employment benefits | (6) | (6) | - |
| 120.PP | Provisions for risks and charges | (23) | (28) | (6) |
The above mentioned purchase price allocation process revealed a negative difference between the purchase price and the fair value of the identifiable assets acquired, liabilities assumed and contingent liabilities net of taxes. This difference represents the gain on bargain purchase.
The gain on bargain purchase identified as part of the above allocation process amounted to 623,6 million Euro and was immediately recognised in profit or loss under "other operating income". In the table showing the breakdown of other operating income, included in part C of these notes, this amount is reported separately under the subline item "Bargain on interest acquisition".
Finally, the Group calculated the value to allocate to non-controlling interests, corresponding to a 0,01% interest in Interbanca, by estimating the fair value based on the purchase price.
The Banca IFIS Group did not carry out any business combinations between the end of the year and the date of preparation of these financial statements.
Despite the mentioned business combination as per IFRS 3, during the year the Bank did not make any retrospective adjustments.
In compliance with the provisions of Consob resolution no. 17221 of 12 March 2010 (as subsequently amended by means of Resolution no. 17389 of 23 June 2010) and the provisions of Circular 263/2006 (Title V, Chapter 5) of the Bank of Italy, Banca IFIS prepared the procedure relating to transactions with "related parties", the current version of which was approved by the Board of Directors on 10 November 2016. This document is publicly available on Banca IFIS's website, www.bancaifis.it, in the 'Corporate Governance' Section.
During 2016, no significant transactions with related parties were undertaken.
At 31 December 2016, the Banca IFIS Group S.p.A. was controlled by La Scogliera S.p.A. and consisted of the parent company Banca IFIS S.p.A., the wholly-owned subsidiary IFIS Finance Sp. Z o. o., the 99,99%-owned subsidiary Interbanca S.p.A. and its subsidiaries IFIS Leasing S.p.A., IFIS Factoring S.r.l., and IFIS Rental Services S.r.l., in which Interbanca owns directly and indirectly all voting rights.
The types of related parties, as defined by IAS 24, that are relevant for the Banca IFIS Group include:
key management personnel;
close relatives of key management personnel and the companies controlled by (or associated to) them or their close relatives.
Here below is the information on the remuneration of key management personnel as well as transactions undertaken with the different types of related parties.
The definition of key management personnel, as per IAS 24, includes all those persons having authority and responsibility for planning, directing and controlling the activities of Banca IFIS, directly or indirectly, including the Bank's directors (whether executive or otherwise).
In compliance with the provisions of the Bank of Italy's Circular no. 262 of 22 December 2005 (4th update of 16 December 2015), key management personnel also include the members of the Board of Statutory Auditors.
| Short-term employee benefits |
Post employment bene fits |
Other long-term bene fits |
Termination benefits | Share-based payments |
|---|---|---|---|---|
| 5.084 | - | 185 | 94 | 479 |
The above information includes fees paid to Directors (3,3 million Euro, gross amount) and Statutory Auditors (363 thousand Euro, gross amount).
Here below are the assets, liabilities, guarantees and commitments outstanding at 31 December 2016, broken down by type of related party pursuant to IAS 24.
| Items | Parent company | Key manage ment personnel |
Other related parties |
Total | As a % of the item |
|---|---|---|---|---|---|
| Loans to customers | - | - | 1.687 | 1.687 | 0,0% |
| Other assets | 43.864 | - | - | 43.864 | 17,6% |
| Total assets | 43.864 | - | 1.687 | 45.551 | 0,5% |
| Due to customers | - | 264 | 1.317 | 1.581 | 0,0% |
| Total liabilities | - | 264 | 1.317 | 1.581 | 0,0% |
| Items | Parent company | Key management personnel |
Other related parties |
Total | As a % of the item |
|---|---|---|---|---|---|
| Interest receivable | - | - | 40 | 40 | 0,0% |
| Interest due | - | (2) | (14) | (16) | 0,0% |
| Commission income | - | - | 12 | 12 | 0,0% |
| Other operating income/expenses | 17 | - | - | 17 | 0,0% |
Transactions with the Parent Company relate to:
Transactions with key management personnel relate almost entirely to rendimax or contomax savings accounts.
Transactions with other related parties are part of Banca IFIS's ordinary business and the conditions applied are at arm's length. Specifically, some individuals qualifying as other related parties held rendimax or contomax accounts with the Bank amounting to 1,3 million Euro overall.
During the year, the Bank continued its factoring operations in favour of one company headed by close relatives of executive members of the Board of Directors: the Banca IFIS Group's exposure at 31 December 2016 amounted to 0.5 million Euro.
In addition, there was a net 1,2 million Euro exposure classified under bad loans towards a company guaranteed by closer relatives of members of the Board of Directors.
Top Management's remuneration consists of fixed pay and variable pay calculated as a percentage of consolidated profit gross of taxes.
Variable pay, which is limited to a maximum proportional to fixed pay, is paid partly upfront and partly deferred.
Upfront variable pay is awarded and paid after the approval of the financial statements and ICAAP report for the year to which it refers.
Deferred variable pay is deferred by three years and is not paid if:
Starting from 2014, variable pay is paid 50% in cash and 50% in Banca IFIS S.p.A. shares. This applies to both upfront and deferred variable pay.
For this purpose, the Bank plans to use treasury shares in its portfolio; the reference price for determining the number of shares to the value of the variable pay concerned will be the average share price for the period from 1 April through 30 April of the year the compensation is awarded and paid.
Upfront variable pay can be clawed back if in the year following its award the right to it has not vested.
The table on annual changes is not presented here, since for the Banca IFIS Group share-based payment agreements do not fall within the category concerned by said table.
The portion to be settled in shares of Top Management's variable pay awarded for the year 2016 amounts to 430 thousand Euro: the number of shares to be awarded will be calculated as described above.
The model for segment reporting is in line with the new organisational structure used by the Head Office to analyse Group results, which, following the acquisition of the former GE Capital Interbanca Group, now includes two new sectors: Corporate Banking and Leasing. In addition, since the acquisition date, the trade receivables sector has been benefiting from the contribution of IFIS Factoring.
Therefore, the organisational structure consists of the following segments: Trade receivables, Corporate banking, Leasing, NPL Area, Tax receivables, Governance and Services.
The Governance and Services segment manages the Group's financial resources and allocates funding costs to operating segments through the Group's internal transfer rate system.
This segment includes the following business areas:
This segment includes the following business areas:
This sector provides finance and operating leases to small businesses and SMEs.
This is the Banca IFIS Group's segment dedicated to non-recourse factoring and managing unsecured distressed retail loans. It serves households under the CrediFamiglia brand.
The business is closely associated with recovering and collecting non-performing exposures.
The Bank manages the portfolio of acquired receivables using two different methods: non-judicial and judicial operations.
As for the portfolio managed through non-judicial operations, to measure them the Bank uses a model based on a simulation of cash flows that projects the "breakdown" of the nominal amount of the receivable "over time" based on the historical recovery profile for similar clusters. As for the positions with funding
characteristics (bills of exchange or settlement plans agreed with the debtor), the Bank uses a "deterministic" model based on the measurement of the future instalments of the settlement plan, net of the historical default rate.
Judicial operations consist in collecting debts through legal actions to secure a court order for the garnishment of one fifth of pension benefits or wages. The cash flows from judicial operations are not simulated using the model: the manager individually measures them for each individual position and enters them in the system.
It is the segment specialised in purchasing tax receivables arising from insolvency proceedings; it operates under the Fast Finance brand and offers to buy both accrued and accruing tax receivables on which repayment has already been requested or which shall be requested in the future, and that arose during insolvency proceedings or in prior years. As a complement to its core business, this segment seldom acquires also trade receivables from insolvency proceedings.
Governance and Services provides the operating segments with the financial resources and services necessary to perform their respective business activities. The segment comprises, among other things, the resources required for the performance of the services of the Audit, Administration-Accounting, Planning, Organisation and ICT functions, as well as the structures responsible for raising, managing and allocating financial resources to the operating segments. The data includes the contribution of the former GE Capital Interbanca Group not allocated to individual segments.
Here below are the results achieved in 2016 by the various business segments.
| TRADE | CORPO | TAX | GOVERN | CONS. | |||
|---|---|---|---|---|---|---|---|
| STATEMENT OF FINANCIAL POSITION |
RECEIVA | RATE | LEASING | NPL AREA | RECEIVA | ANCE AND | GROUP |
| (in thousands of Euro) | BLES | BANKING | BLES | SERVICES | TOTAL | ||
| Available for sale financial assets | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 374.229 | 374.229 |
| Amounts at 31.12.2015 | - | - | - | - | - | 3.221.533 | 3.221.533 |
| % Change | - | - | - | - | - | (88,4)% | (88,4)% |
| Due from banks | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 1.393.358 | 1.393.358 |
| Amounts at 31.12.2015 | - | - | - | - | - | 95.352 | 95.352 |
| % Change | - | - | - | - | - | 1361,3% | 1361,3% |
| Loans to customers | |||||||
| Amounts at 31.12.2016 | 3.092.488 | 905.682 | 1.235.638 | 562.146 | 124.697 | 7.561 | 5.928.212 |
| of which IFIS Factoring | 192.055 | - | - | - | - | - | 192.055 |
| Amounts at 31.12.2015 | 2.848.124 | n.a. | n.a. | 354.352 | 130.663 | 103.997 | 3.437.136 |
| % Change | 8,6% | n.a. | n.a. | 58,6% | (4,6)% | (92,7)% | 72,5% |
| Due to banks | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 503.964 | 503.964 |
| Amounts at 31.12.2015 | - | - | - | - | - | 662.985 | 662.985 |
| % Change | - | - | - | - | - | (24,0)% | (24,0)% |
| Due to customers | |||||||
| Amounts at 31.12.2016 | - | - | - | - | - | 5.045.136 | 5.045.136 |
| Amounts at 31.12.2015 | - | - | - | - | - | 5.487.476 | 5.487.476 |
| % Change | - | - | - | - | - | (8,1)% | (8,1)% |
| INCOME STATEMENT DATA (in thousands of Euro) |
TRADE RECEIVA BLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TOTAL |
|---|---|---|---|---|---|---|---|
| Net banking income | |||||||
| Amounts at 31.12.2016 | 174.433 | 2.952 | (1.172) | 187.368 | 13.990 | (18.972) | 358.599 |
| Amounts at 31.12.2015 | 158.671 | n.a. | n.a. | 56.300 | 20.335 | 172.652 | 407.958 |
| % Change | 9,9% | n.a. | n.a. | 232,8% | (31,2)% | (111,0)% | (12,1)% |
| Net profit (loss) from financial activi ties |
|||||||
| Amounts at 31.12.2016 | 154.128 | 2.889 | (2.682) | 154.740 | 13.620 | (23.329) | 299.366 |
| Amounts at 31.12.2015 | 137.423 | n.a. | n.a. | 52.687 | 19.923 | 163.675 | 373.708 |
| % Change | 12,2% | n.a. | n.a. | 193,7% | (31,6)% | (114,3)% | (19,9)% |
| QUARTERLY INCOME STATE MENT DATA (in thousands of Euro) |
TRADE RECEIVA BLES |
CORPO RATE BANKING |
LEASING | NPL AREA | TAX RECEIVA BLES |
GOVERN ANCE AND SERVICES |
CONS. GROUP TOTAL |
|---|---|---|---|---|---|---|---|
| Net banking income | |||||||
| Fourth quarter 2016 | 53.142 | 2.952 | (1.172) | 51.825 | 3.126 | (12.546) | 97.327 |
| Fourth quarter 2015 | 39.728 | n.a. | n.a. | 22.402 | 8.828 | 5.834 | 76.792 |
| % Change | 33,8% | - n.a. |
- n.a. |
131,3% | (64,6)% | (315,0)% | 26,7% |
| Net profit (loss) from financial activi ties |
|||||||
| Fourth quarter 2016 | 48.061 | 2.889 | (2.682) | 42.780 | 3.025 | (12.904) | 81.169 |
| Fourth quarter 2015 | 33.237 | n.a. | n.a. | 21.818 | 8.542 | 5.106 | 68.703 |
| % Change | 44,6% | - n.a. |
n.a. | 96,1% | (64,6)% | (352,7)% | 18,1% |
| SEGMENT KPIs (in thousands of Euro) |
TRADE RE CEIVABLES |
CORPORATE BANKING |
LEASING | NPL AREA | TAX RECEIV ABLES |
GOVERN ANCE AND SERVICES |
|---|---|---|---|---|---|---|
| Turnover | ||||||
| Amounts at 31.12.2016 | 10.549.881 | n.a. | n.a. | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 10.126.397 | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 4,2% | - | - | - | - | - |
| Nominal amount of receivables man aged |
||||||
| Amounts at 31.12.2016 | 3.880.835 | 1.739.175 | 1.273.933 | 9.660.196 | 172.145 | n.a. |
| Amounts at 31.12.2015 | 3.576.982 | n.a. | n.a. | 8.161.005 | 190.553 | n.a. |
| % Change | 8,5% | - | - | 18,4% | (9,7)% | - |
| Cost of credit quality | ||||||
| Amounts at 31.12.2016 | 0,8% | 0,1% | 1,5% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 0,9% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (0,1)% | n.a. | n.a. | - | - | - |
| Net bad loans/Loans to customers | ||||||
| Amounts at 31.12.2016 | 1,0% | 3,0% | 0,5% | 57,0% | 0,0% | n.a. |
| Amounts at 31.12.2015 | 1,1% | n.a. | n.a. | 45,0% | 0,0% | n.a. |
| % Change | (0,1)% | n.a. | n.a. | 12,1% | 0,0% | - |
| Net bad loans/Equity | ||||||
| Amounts at 31.12.2016 | 2,6% | 2,2% | 0,5% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 5,4% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (2,8)% | n.a. | n.a. | - | - | - |
| Coverage ratio on gross bad loans | ||||||
| Amounts at 31.12.2016 | 88,5% | 94,0% | 92,2% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 87,9% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 0,7% | n.a. | n.a. | - | - | - |
| Non-performing exposures/Loans to customers |
||||||
| Amounts at 31.12.2016 | 6,5% | 19,0% | 3,0% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 4,5% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | 2,0% | n.a. | n.a. | - | - | - |
| Net non-performing loans/Equity | ||||||
| Amounts at 31.12.2016 | 16,5% | 14,1% | 3,0% | n.a. | n.a. | n.a. |
| Amounts at 31.12.2015 | 22,4% | n.a. | n.a. | n.a. | n.a. | n.a. |
| % Change | (6,0)% | n.a. | n.a. | - | - | - |
| RWA | ||||||
| Amounts at 31.12.2016 | 2.348.131 | 929.337 | 875.153 | 562.146 | 50.004 | 263.512(4) |
| Amounts at 31.12.2015 | 1.970.886 | n.a. | n.a. | 354.352 | 41.614 | 25.256 |
| % Change | 19,1% | n.a. | n.a. | 58,6% | 20,2% | 943,4% |
(1) Gross flow of the receivables sold by the customers in a specific period of time.
(2) Risk Weighted Assets; the amount refers exclusively to the financial items reported in the segments.
(3) Data restated after initial publication.
(4) The Governance and Services sector's RWAs include in 2016 the investment in IFIS Rental Services, a non-financial company consolidated using the equity method and that is not part of the Banking Group for supervisory purposes.
For a more detailed analysis of the results of the business sectors, please refer to the Directors' Report.
Venice - Mestre, 16 March 2017
For the Board of Directors
The Chairman Sebastien Egon Fürstenberg
The C.E.O. Giovanni Bossi
In order to increase the EU public's trust in the financial sector, here below is the information as per the letters a), b) and c) of Annex A to Part I, Title III, Chapter 2 of Bank of Italy's Circular No. 285.
The information refers to the situation at 31 December 2016.
| INFORMATION/GEOGRAPHIC AREA | ITALY | POLAND | GROUP | |
|---|---|---|---|---|
| Company name | Banca IFIS S.p.A. Interbanca S.p.A. |
IFIS Finance Sp. Z o.o. |
Banca IFIS S.p.A. Group |
|
| a) | Nature of business | Collecting savings from the public and lending. Banca IFIS specialises in the seg ment of trade receivables, medium/long-term corporate lending and structured fi nance, leasing, distressed retail loans and tax receiva bles. |
IFIS Finance pro vides financial sup port and credit man agement services to businesses. |
Collecting savings from the public and lending. Banca IFIS specialises in the seg ment of trade receiva bles, distressed retail loans and tax receiva bles. |
| b) | Turnover11 (in thousands of Euro) | 355.230 | 3.369 | 358.599 |
| c) | Number of full-time equivalents 12 | 1.304,2 | 11,5 | 1.315,8 |
| (d) | Pre-tax profit or loss (in thousands of Euro) |
718.299 | 2.227 | 720.526 |
| e) | Income tax (in thousands of Euro) |
(32.086) | (455) | (32.541) |
| f) | Government grants received (in thousands of Euro) |
- | - | - |
11 Turnover corresponds to the Net Banking Income as per item 120 of the Consolidated Income Statement at 31 December 2016.
12 The "Number of full-time equivalents" is calculated, in accordance with the relevant Provisions, as the ratio of total hours worked by all employees (including overtime) and the total contract work hours per year of a full-time employee (i.e. the total available work hours in a year excluding 20 days of annual leave).
Certification on the consolidated financial statements pursuant to the provisions of article 154-bis, paragraph 5, of the Legislative Decree 58 of 24 February 1998 and article 81-ter of Consob Regulation no. 11971 of 14 May 1999 as amended
Dear Shareholders,
With this report, prepared pursuant to art. 153 of Legislative Decree 58/1998 and to art. 2429, paragraph 2, of the Italian Civil Code, the Board of Statutory Auditors of Banca IFIS S.p.A. informs you of the supervisory and control activities carried out in the performance of their duties, during the year ended 31st December 2016.
You are reminded that, according to the provisions of the by-laws which govern elections, during the Shareholders' Meeting on 22 March 2016 you renewed the Board of Statutory Auditors in the persons of the undersigned Giacomo Bugna, Giovanna Ciriotto and Massimo Miani.
During the year 2016 the Board of Statutory Auditors carried out their institutional tasks in accordance with the rules of the Italian Civil Code and with Legislative Decrees no. 385/1993 (1993 Banking Law), no. 39/2010 and no. 58/1998 (Consolidated Law on Finance), of the By-Laws, in addition to being in compliance with those issued by the public authorities that exercise activities of supervision and control, also taking into account the principles of conduct recommended by the National Council of Chartered Accountants in the document of 15 April 2015.
During the year the Board of Statutory Auditors performed its duties, holding 28 meetings, of which 6 were held jointly with the Risk Management and Internal Control Committee, and one jointly with all the three committees within the Board of Directors.
The Board also participated in 21 meetings of the Board of Directors.
The Chairman of the Board of Statutory Auditors or another Auditor also participated in the meetings of the Risk Management and Internal Control Committee, of the Appointments Committee and of the Remuneration Committee.
The minutes of the Board of Statutory Auditors, which sometimes contain explicit recommendations to rapidly resolve difficulties that have come to light, are always sent in their entirety to the CEO and to the General Manager. The Chairman of the Risk Management and Internal Control Committee is constantly invited to attend meetings of the Board of Statutory Auditors. It is believed that such attendance will ensure an adequate flow of information between the committees within the Board of Directors.
The head of the Internal Audit also attends the meetings of the Board of Statutory Auditors, as a permanent invitee for the continuous interaction with the corporate function of third-level control.
In 2016, Banca IFIS S.p.A. was subject to inspections carried out by the Supervisory Authority, which concluded without any findings of note. On request, the Board of Statutory Auditors intervened with the delegation of inspectors.
In light of the comments made in the inspection report, the Bank has made plans for corrective actions which must be carried out in respect of the timings communicated to the Supervisory Authority.
Lastly, it is deemed useful to mention that since 30 November 2016 - the date on which, having received authorisation from the relative Supervisory Authority, Banca IFIS acquired all investments held by GE Capital International Holding Limited, equal to 99.993%, in the share capital of the ex GE Capital Interbanca S.p.A., and therefore also of its subsidiaries IFIS Leasing S.p.A., IFIS Factoring S.r.l. and IFIS Rental Services S.r.l. - the President and an acting member of the Board of Statutory Auditors of Banca Ifis were appointed by the respective Meetings for similar positions in the Boards of Statutory Auditors of the acquired companies: this was in order to increase the efficiency of the activity of governance and the circulation of information throughout the entire group.
In carrying out the activities of supervision and control, the Board of Statutory Auditors obtained periodically from the Directors, including through the participation in meetings of the Board of Directors, information on the activities carried out and on the most important economic, financial and asset liability operations approved and implemented by the Bank and by the subsidiaries, also pursuant to art. 150, paragraph 1 of the Consolidated Law on Finance.
As previously stated, over the course of the year, the acquisition of the GE Capital Interbanca S.p.A. Group was completed. This acquisition led to the widening of the Banca Ifis banking group which is now composed of Banca Ifis S.p.A., IFIS Finance Sp. z.o.o., Interbanca S.p.A., Ifis Leasing S.p.A. and Ifis Factoring S.r.l.. As a consequence, the consolidated companies are more wideranging in comparison to the previous year and, as well as including the companies within the banking group, also include Ifis Rental Services S.r.l..
Among the significant events of 2016, the details of which are provided in the Management Report and the Explanatory Notes, it is considered appropriate to report the following, as well as the aforementioned acquisition:
Lastly, it is considered useful to highlight that, as part of the company reorganisation process which will also lead to the merging of Ifis Factoring S.r.l. into the Parent Company by the end of 2017, on 9 February 2017 the Board deliberated on the acquisition of investments in Ifis Factoring S.r.l. held by Interbanca S.p.A. and by IFIS Leasing S.p.A..
On the basis of the information obtained through its own supervisory activities, the Board of Statutory Auditors was not made aware of any operations that had not been conducted in compliance with the principles of correct management and that had not been approved and implemented in accordance with the law and with the By-Laws, which were contrary to the interests of the Bank, that were in contrast with the resolutions passed by the Shareholders' Meeting, that were imprudent or risky or were such as to compromise the integrity of the corporate assets.
The Board was not made aware of any operations that could pose conflicts of interest.
The Board of Statutory Auditors monitored compliance of the Procedure for operations with subjects related to the law in force and its correct application.
In particular, as provided for by the relevant rules, the Chairman and/or the other Statutory Auditors participated in the meetings of the Audit and Risk Committee to discuss operations with related parties; the Board of Statutory Auditors periodically received information relating to the progress of their positions.
Both as a result of the Bank's organisational evolution and of the aforementioned acquisition, the composition of strategic and relevant personnel was updated and persons were identified to be submitted to the procedures envisaged by the company's policies for controlling transactions with associated persons.
The Board of Statutory Auditors judged that the Board of Directors, in the Management Report and in the Explanatory Notes, had provided adequate information on the operations with related parties, taking into account the provisions of the regulations in force. To the knowledge of the Board of Statutory Auditors, there were no intra-group operations or operations with the related parties that were being implemented in 2016 that were contrary to the interests of the company.
In the year 2016, the Bank did not perform any atypical or unusual transactions. With regard to the operations of greater significance and of an ordinary nature, these respect the limits of prudence, do not contravene the resolutions of the Shareholders' Meetings and do not prejudice the company's assets.
During the year the Board of Statutory Auditors brought to the attention of the Management Function Body possible improvements for the procedure for monitoring the Most Important Operations in the context of the application experiences that had occurred.
Regarding the outsourcing of activities of the Bank, and in particular of the Important Operational Functions, the Board of Statutory Auditors:
It is deemed useful to take this opportunity to underline that the Board of Statutory Auditors noted that the Board of Directors, having analysed the information contained in the 15th amendment to the Bank of Italy Circular 263/2013 regarding attribution to the Board of Statutory Auditors of the Supervisory Body functions, considered it appropriate to keep separate the functions of the Supervisory Body from those of the Board of Statutory Auditors; this choice, which is discussed in the Corporate Governance Report, is, on the one hand, justified given the number and complexity of the topics that are already normally subject of the tasks of the Board of Statutory Auditors and on the other in light of the specificity of the duties of the Supervisory Body.
The Board of Statutory Auditors, in acknowledging the accession of Banca IFIS S.p.A. to the Self-Governance Code for listed companies, verified the requirements of independence of its members, in addition to the correct application of the criteria and procedures of verification adopted by the Board to assess the independence of the Directors, also following the updating of Corporate Bodies.
The Board placed emphasis on the implementation of a number of initiatives in the area of organisational structure, geared to strengthening of the management structure and to the continued strengthening of risk monitoring.
Having considered the development of the Bank, not only quantitatively, the Board focused on preparation of organisational safeguards to improve monitoring of the main risks. In this context, the Board of Statutory Auditors acknowledged that audit systems were adapted to the updated composition of the group via the definition of processes and management policies and the coordination of audit processes.
The Board of Statutory Auditors also recommended the strengthening of procedures for the monitoring and auditing of potential risks regarding the increased level of debt resulting from the aforementioned operation of acquisition.
In recognising the changes introduced on an organisational structure level, the Board of Statutory Auditors called the attention of Top Management to the verification of adequacy of dedicated human resources, with particular reference to auditing roles, also in light of the widening of the group of consolidated companies.
Furthermore the NPL Area was subject to organisational evolution, aimed at a more efficient and effective processing of purchased portfolios. In acknowledging the changes, the Board of Statutory Auditors underlined the necessity for improvements in reporting procedures for company bodies regarding the progress and monitoring of NPL Area activity.
Finally on the development of activities related to the strengthening of credit risk monitoring, including the design and implementation of the IRB system for management purposes, the Board stressed the necessary rapidity in the full implementation of the IRB system.
In 2016, continuing the work carried out in the previous year, the Board also:
From the audits and examination of the Audit Function reports, the continuous and constant strengthening of the internal control system is evident; in particular, of note are:
In light of the evolution of the Bank's activities and the more wide-ranging configuration of the banking group, the Board advised improvement of the management and control of sensitive assets and liabilities maturities and of the related financial and economic impacts, thus aiming to achieve the rapid implementation of further adequate organisational safeguards.
Intervention plans were provided with reference to the activities and to the problems identified, whose timely implementation is judged by the Board of Statutory Auditors as essential and that require particular attention by the Management Function Body.
On the basis of the activities carried out, the Board of Statutory Auditors – also in relation to the continuous dimensional growth of the Bank and the group – believes that there are certain areas for possible further improvement, highlighting at the same time that there are no significant deficiencies in the internal control system.
The Board indicates that the manager responsible for preparation of the company's accounting and corporate documents changed during 2016; it is recognised that the procedure for identification and appointment has been respected and the Board expressed its favourable opinion on the appointment during the Board Meeting on 12 April 2016.
It is deemed useful to highlight that said change originated from the possible evolution of the organisational layout of the Bank, also in light of a possible change to the group of consolidated companies.
The Board periodically met the manager responsible for the exchange of information on the administrative-accounting system and in addition discussed the reliability of the latter in order to have a correct representation of management-related issues.
During these meetings, the Financial Reporting Officer made no indication of any significant shortcomings in the operational and auditing processes which could invalidate the adequacy and effective application of administrative accounting procedures.
The Board examined the Report of the manager responsible containing the results of tests on the controls carried out as well as the main problems identified in the framework of the application of relevant legislation.
During the year the Bank, with the constant support of the Board of Statutory Auditors, improved the audit systems to ensure consistency and alignment of the data between the various characteristic sources of the individual pieces of information.
It is deemed appropriate to highlight the process undertaken by the Bank for the evolution of the ICT information system, which will see the adopting of a new core banking system. In this light the Board of Statutory Auditors recommended the continuous monitoring of costs planned for this initiative, and particular attention to auditing procedures for the integration and aligning of data between the various sources of information, and to the procedure for financial reporting.
The Board of Statutory Auditors also examined declarations, issued on 16 March 2017 for the year 2016, by the CEO and by the manager responsible, in accordance with the provisions contained in art. 154 bis of the Consolidated Law on Finance and in art. 81 ter of the Consob Regulations 11971/1999, from which no failings emerged that might affect the judgement of adequacy of the administrative-accounting procedures.
The Board of Statutory Auditors then acknowledged the monitoring systems developed by the Financial Reporting Officer regarding the relative subsidiaries in the group of consolidated companies which do not demonstrate profiles of significant criticality.
At periodic meetings, and in light of the Report on Fundamental Matters, provided for pursuant to article 19 of Legislative Decree n° 39/2010 and issued on 27 March 2017, the auditing firm Ernst & Young reported no problem situations to the Board of Statutory Auditors that could affect the internal control system relating to the administrative and accounting procedures nor did it ever
highlight facts that were deemed reprehensible or any irregularities that would require reporting pursuant to art. 155, paragraph 2, of the Consolidated Law on Finance.
The Board of Directors prepared, in accordance with the law, the consolidated financial statements as of 31 December 2016 of the Banca IFIS Group that were submitted for audit by the external auditing firm Ernst & Young S.p.A. The group of consolidated companies was significantly modified following the aforementioned acquisition. The Board of Statutory Auditors acknowledged the preparation of instructions provided to the subsidiaries for the process of consolidation. It is deemed useful to highlight that, following the change in ownership of the acquired companies, on 30 November 2016, the auditing company for the same was changed, passing the role of auditing to the auditors of the Ernst & Young S.p.A. group.
With regard to the consolidated financial statements – as required by the rules of conduct recommended by the National Board of Certified Public Accountants in the document of 15 April 2015 – the Board of Statutory Auditors monitored compliance with the procedural rules concerning the formation and setting out of the same and of the management report.
In light of the above, there are no elements which demonstrate that the activity was not carried out in respect for the principles of correct administration, nor that the organisational layout, internal auditing systems and the accounting and administrative systems are not, as a whole, suited to the requirements and dimension of the company.
The Board of Statutory Auditors, as the "Committee for internal audit and for the general auditing procedure", carried out the task of supervision of the external auditing firm's operations, as provided for by art. 19 of Legislative Decree no. 39/2010.
During the year the Board of Statutory Auditors met the external auditing firm Ernst & Young S.p.A. several times, as already stated, pursuant to art. 150 of the Consolidated Law on Finance, in order to exchange information concerning the activities carried out in implementation of their respective duties.
External Auditing Firm
of the "Report on corporate governance and shareholder structure" are consistent with the annual financial statements and consolidated financial statements as at 31 December 2016.
On 27 March 2017 the external auditing firm presented to the Board of Statutory Auditors the report on the independence of the auditor, as required by art. 17 of Legislative Decree no. 39/2010, from which no situations emerge that might compromise its independence or constitute causes of incompatibility pursuant to the cited decree.
The external auditing firm also submitted to the Board of Statutory Auditors, on the same date, the Report on Key Issues, as provided for under art. 19 of Legislative Decree no. 39/2010, which showed that during the audit of the financial statements and of the consolidated financial statements of Banca IFIS S.p.A., closed at 31 December, 2016, no significant deficiencies in the internal control system were identified in relation to the financial reporting process.
The Board of Statutory Auditors reports that during 2016, in addition to the task of auditing the individual financial statements and the consolidated financial statements (for which the annual fee amounts to € 136,000 plus expenses), Ernst & Young S.p.A., with the agreement of this Board, was appointed to the post for the examination of profiles regarding the consolidated statement of financial position and income statement, complete with explanatory notes, of the Banca Ifis group for the six-month period ending on 30 June 2016 for the preparation of the Explanatory Document pursuant to article 71 of the regulations for the implementation of Legislative Decree of 24 February n° 58, regarding the acquisition of 99.993% of the share capital of GE Capital Interbanca S.p.A. The contracted fee for that position amounts to € 24,000 plus expenses.
Furthermore, on 16 November 2016, regarding the prevision for increased activity to be carried out regarding the auditing of PPA activity affecting the consolidated financial statements for 2016 following the aforementioned acquisition, Ernst & Young S.p.A. put forward a proposal for the integration of remuneration regarding the auditing and certification of the consolidated financial statements for the 2016 financial year.
The Board of Statutory Auditors examined said proposal and, during the Board meeting on 28 November 2016 which approved said integration of remuneration for 2016, expressed its opinion in favour. The integration of remuneration amounts to € 60,000 plus expenses, corresponding to an increased use of resources for 560 hours.
The external auditing firm also confirmed to the Board of Statutory Auditors that, during the year and in the absence of the conditions for their release, it did not issue opinions pursuant to the law.
As recommended by the standards of conduct of the National Council of Chartered Accountants, in 2016 the Board of Statutory Auditors acquired from the Supervisory Body all the information useful to verify those aspects relating to the autonomy, the independence and the professionalism necessary to efficiently carry out the tasks assigned to it.
The Board of Statutory Auditors thus acquired from the Body the information on the adequacy of the organisational model adopted by the company, on its concrete functioning and on its effective implementation.
The Supervisory Body reported on the activities carried out during the year ended 31 December 2016 without indicating any significant critical profiles, highlighting a situation of substantial alignment with the provisions of the organisation and management model pursuant to Legislative Decree no. 231/2001.
The Board of Statutory Auditors took note that during the meeting on 2 March 2017, the Board of Directors approved the document "Report on Remuneration", regarding the 2016 financial year. With reference to remuneration policies, it is deemed opportune to underline that the By-laws foresee for the impossibility for the Meeting itself to: (i) "set a limit to the ratio between the variable and the fixed component of the individual remuneration greater than 1: 1"; (ii) award the Chairman a remuneration higher than that "fixed received by the head of the Management Function Body".
The Board of Statutory Auditors furthermore acknowledged, thus agreeing with the comments within, the verifications carried out by the Internal Audit bodies and presented in the "Report on verifications carried out regarding the suitability of procedures for remuneration, with regards to policies and regulatory context": verifications which led to a satisfactory outcome.
During the year 2016 the Board of Statutory Auditors took note of the allocation of treasury shares of the Bank to the CEO and to the General Manager in accordance with the policies approved by the Shareholders' Meeting of 8 April 2015 and of the operating procedure approved by the Board of Directors.
In general, in light of the provisions issued by the Supervisory Authorities on the subject of remuneration and incentive systems, the Board of Statutory Auditors monitored, in close connection with the Remuneration Committee, the correct application of the rules governing the remuneration of managers of the Control Functions and of the Manager Responsible and the communication of remuneration policies for the 2017 financial year to the companies belonging to the Group.
On the basis of the information available so far, the Board considers that the principles set out in the Remuneration Report are not inconsistent with the corporate objectives, strategies and policies of prudent risk management.
The Board of Statutory Auditors is not aware, in addition to what has already been discussed earlier, of facts or details that need to be communicated to the Shareholders' Meeting.
The Board of Statutory Auditors did not receive during the year 2016 complaints from shareholders pursuant to art. 2408 of the Italian Civil Code.
In the course of the activity performed and on the basis of the information obtained, no omissions, reprehensible facts, irregularities or in any case other significant circumstances were detected that would require reporting to the Supervisory Authorities or mention in this report.
In conclusion, the Board of Statutory Auditors, taking into account the specific tasks conferred to the external auditing firm regarding auditing of the accounts and of the reliability of the financial statements, issued its opinion without qualifications, and in light of the claims issued pursuant to art. 154 bis of Legislative Decree 58/1998 by the Officer appointed to prepare the accounts and the corporate documents and by the CEO, has no comments to make to the Shareholders' Meeting, pursuant to art. 153 of the FSA, concerning the approval of the financial statements for the year to 31 December 2016, accompanied by the Management Report, as presented by the Board of Directors and therefore has no objections to the approval of the financial statements, to the proposed allocation of the operating profit or to distribution of the dividends.
Venezia - Mestre, 29 March 2017
For the Board of Statutory Auditors The Chairman
Giacomo Bugna
The attached report of the independent auditors and the consolidated financial statements, to which the report refers, conform to those which will be deposited at the registered office of Banca IFIS S.p.A. and published pursuant to the law; subsequent to the date of the report, EY S.p.A. did not carry out any audit work aimed at updating its contents.
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