Investor Presentation • Feb 9, 2023
Investor Presentation
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PRESS RELEASE
Milan, 9th February 2023 – Today the Board of Directors of BFF Bank S.p.A. ("BFF" or the "Bank") approved BFF's full year 2022 consolidated financial accounts1 .
1 FY22 consolidated reported P&L includes DEPObank for the whole period, unlike FY21 reported P&L, which includes DEPObank from March to December 2021. FY22 and FY21 adjusted P&Ls include DEPObank for the entire period.
Massimiliano Belingheri, BFF Group CEO, commented: "The year 2022 brought double-digit growth in Group's profits, delivering full synergies of DEPObank acquisition one year ahead of schedule, and expectations of increasing profitability. We are pleased to announce a new Adjusted Net Profit Target for 2023, increased to €180-190m, with significant unlocked potential related to rising interest rates for the year ahead. We are proud of the growth in our loan portfolio, which recorded a new all-time high, and of the solid capitalisation of the Group."
FY22 Adjusted Net Revenues were €379.1m, of which €170.1m coming from Factoring, Lending & Credit Management business unit, €52.5m from the Securities Services, €63.3m from Payments, and €93.2m from the Corporate Center (including synergies). Total Adjusted operating expenditures, including D&A, were €167.6m, and Adjusted LLPs and provisions for risks and charges were €6.2m.
This resulted in an Adjusted Profit before taxes of €205.4m, and an Adjusted Net Profit of €146.0m, +16.6% YoY. FY22 Reported Net Profit was €232.0m (for details, see footnote n° 2).
At the end 2022, the employees at Group level were 841 (vs. 862 at the end of 2021), of which:
With regard to business units' KPIs and adjusted Profit & Loss data, please refer to the "FY 2022 Results" presentation published in the Investors > Results > Financial results section of BFF Group's website. Please note that the Corporate Center comprises all the revenues and costs not
2 Reported Net Profit includes:
• the negative impact of adjustments accounted on the following items:
• -€3.3m post tax, -€4.4m pre tax, related to Stock Options & Stock Grant plans
• -€4.6m post tax, -€6.7m pre tax ,of M&A Costs
• -€4.9m which includes taxes on: one-off dividend distribution from subsidiaries (c.-€2.7m) and the write off of a DTA il Poland (c. -€2.2m)
• -€3.1m post tax, -€4.6m pre tax, related to Customer contract amortizations.
• the positive impact of the adjustment accounted on the following items:
• +€100.1m post tax, +€138.7m pre tax related to change in assets value, including LPIs and "Recovery costs"
• +€1.7m post tax, +€2.4m pre tax related to Gains on Trading
• +€0.2m post tax, +€0.3m pre tax, related to the capital gain on the sale of a building owned by BFF Bank located in Rome.
directly allocated to the three core business units (Factoring, Lending & Credit Management, Securities Services and Payments).
As of 31st December 2022, the consolidated Balance Sheet amounted to €13.3bn up by €2.2bn, +19% vs. YE21. With respect to Total Assets, at the end of December 2022 the Loan Book was at €5,442m3 , at historical highs, up by €1.7bn YoY (+45% YoY, at €3,763m as of YE21), with strong performance of Italy, up by +59% YoY.
At the end of December 2022, the Government bond portfolio was classified entirely as Held to Collect or "HTC". The bond portfolio amounts to €6.1bn at the end of Dec-22, vs. €5.8bn at YE21, with €4.2bn floating rate bonds, and €1.9bn fixed rate bonds, following a rebalancing portfolio strategy, aimed at increasing floaters to benefit from raising interest rates. The Fixed bond portfolio residual average life was 31 months, with a yield of 0.35%; the floater bond residual portfolio average life was 64 months, with a spread +0.96% vs. 6-month Euribor and a running yield of 3.03% as of 31-Dec-22. Cash and Cash Balances were €0.6bn as of YE22, up by €0.1bn (+14.5%) YoY.
On the Liabilities side the main changes vs. YE21 are the following:
3 Loan book portfolio includes fiscal receivables "Ecobonus" for €221m, which are accounted in "Other Asset" in the FY 2022 Consolidated Financial Accounts and the stock of on-balance sheet "recovery cost" rights and LPIs at €466m.
March 2022, following the exercise of the call option.
The Euro cost of funding was -40bps over 1-month Euribor in 4Q22, vs. -17bps over 1-month Euribor in 3Q22.
BFF does not have European Central Bank "ECB" funding to be refinanced, nor ordinary (OMO) neither extraordinary (PELTRO, TLTRO…).
The Group maintained a strong liquidity position, with Liquidity Coverage Ratio (LCR) at 297.8% as of 31st December 2022. The Net Stable Funding Ratio (NSFR) and the Leverage Ratio, atthe same date, were equal to 161.1% and 4.6% respectively.
***
The Group continues to benefit from a very low exposure towards the private sector. Net nonperforming loans ("NPLs"), excluding Italian Municipalities in conservatorship ("in dissesto"), were €6.7m, at 0.1% of net loans, with an improved 74% Coverage ratio vs. 9M22 and vs. YE21. Italian Municipalities in conservatorship are classified as NPLs by regulation, despite BFF is entitled to receive 100% of the principal and late payment interests at the end of the conservatorship process.
Annualized Cost of Risk on loans was 11.2 basis points at YE22, with an increase vs. the previous periods mostly due to specific provisions on private exposures in Poland.
At the end of December 2022 net Past Due amounted to €185.3m, stable vs. €187.1m as of 30-Sept-22 when they increased due to more stringent interpretation criteria on the New DoD (Guidelines on the application of the definition of default under Art. 178 of Regulation (EU) no. 575/2013) issued by Bank of Italy on 23rd September 2022.
Total Net impaired assets (non-performing, unlikely to pay, and past due) were €283.8m as of YE22 stable vs. 30-Sept-22 with 92% towards public sector.
Starting from the end of 2022 BFF, based upon its collection track record, changed its collection estimate on (i) "Recovery Cost" rights to 50% (previously cash accounted), (ii) LPI's recovery rate accrual to 50% from 45% (iii) LPI collection days at 2,100 days, based on new long-term collection trends. These changes still leave €530m of off-balance sheet reserves still not recognized in BFF accounts (€410m of off-balance sheet LPIs fund and €120m of off-
balance sheet Recovery Costs fund) and were the main drivers of a positive €100m one off profit.
The Group maintains a strong capital position with a Common Equity Tier 1 ("CET1") ratio of 16.9% vs. a SREP of 9.00% (increased from the previous requisite of 7.85% as communicated to the market with the press release of 8th August 2022). The Total Capital ratio ("TCR") is at 22.3%, well above both the Bank's TCR target of 15.0%, and the SREP of 12.50% (prior to 8th August 2022, the SREP was 12.05%), with €201m of capital in excess of 15.0% TCR target. Both ratios exclude the €77.5m dividends to be paid after the Annual General Meeting of 13th April 2023.
FY22 dividends are €146.0m, including €68.5m of interim dividend paid in Aug-22. BFF has repaid since IPO more than €615m in dividends to its shareholders, c. 77% of the IPO market capitalization.
Risk Weighted Assets ("RWAs") calculation is based on the Basel Standard Model. As of YE22 RWAs were €2.7bn (vs. €2.2bn at YE21 and €1.6bn at YE20 of BFF stand-alone), with a density4 of 42%, vs. 45% at YE21 and 39% at YE20. In 2022 the growth in loan book drove the decline in RWA density vs. FY21, despite the new DoD implementation.
***
From 1-Jan-23, Eurozone LPI statutory rate increased by 2.5%, to 10.5% from previous 8%, generating a step up in the gross yield on overdue loan portfolio of 1.25% at a 50% accrual recovery rate. It is expected a further increase to 11.75% at the next refixing date (1-Jul-23), of which 11.00% has been already locked-in with the rates' increase of 2nd February 2023.
As announced in the press release published of 4th January 2023, BFF does not longer qualify as Small Medium Enterprise ("SME") pursuant to Article 1, paragraph 1, letter w-quarter. 1 ) of Legislative Decree No. 58 of 24 February 1998 ("Consolidated Law on Finance" or "TUF"). It should be noted that the loss of BFF's SME qualification requires the application of an additional
4 Calculated as RWAs/Total assets excluding HTC bond portfolio and Cash and Cash Balances.
threshold for the disclosure obligations of significant shareholdings equal to 3% of the capital, pursuant to Article 120 of the Consolidated Law on Finance. Accordingly, shareholders who hold shareholdings higher than the new threshold of 3% and less than 5% of BFF share capital, must notify Consob and BFF Bank in accordance with Articles 117, paragraph 2-bis, and 121, paragraph 3-bis, of the Issuers' Regulations.
At the beginning of February 2023, BFF received the authorization from the Bank of Italy for the Bank's shares' buy-back, up to a maximum amount of €2.8 million, as communicated in the press release of 1st February 2023.
The shares' buy-back programme aims at providing the Bank with a stock of financial instruments necessary to fulfil the obligations of the remuneration and incentive systems related to BFF's "Banking Group remuneration and incentive Policy" in force.
The starting date, timing, exact amount and other details of the shares' buyback program, will be the subject of subsequent communication to the market.
***
2023 Net Income Adj. Target5 increased to €180-190m from €170-180m. New medium- term Targets review will be published before the 1H23 Result announcement.
The upward revision is driven mainly by the positive impact deriving from the change in LPIs accrual accounting at 50% (from previous 45%), the accrual accounting of the "Recovery cost" rights, previously cash accounted, the increase in LPI rate from 1-Jan-23, and despite the impact of Arca's exit, of the factoring repricing time-lag, of the lengthening of LPI collection times and of cost inflation.
***
The Financial Reporting Officer, Giuseppe Manno, declares, pursuant to paragraph 2 of article 154-bis of the Legislative Decree n° 58/1998 ("Testo Unico della Finanza"), that the accounting information contained in this press release corresponds to the document results, accounting books, and records of the Bank.
5 Adjusted Net Income excluding stock options costs and other exceptionals.
***
FY 2022 consolidated results will be presented today, 9th February, at 14:30 CET (13:30 WET) during a conference call, that can be followed after registering at this link. The invitation is published in the Investors > Results > Financial results section of BFF Group's website.
***
This press release is available on-line on BFF Group's website www.bff.com within the Investors > PR & Presentations section.
BFF Banking Group is the largest independent specialty finance in Italy and a leading player in Europe, specialized in the management and non-recourse factoring of trade receivables due from the Public Administrations, securities services, banking and corporate payments. The Group operates in Italy, Croatia, the Czech Republic, France, Greece, Poland, Portugal, Slovakia and Spain. BFF is listed on the Italian Stock Exchange. In 2022 it reported a consolidated Adjusted Net Profit of €146.0 million, with a 16.9% Group CET1 ratio at the end of December 2022. www.bff.com
Investor Relations Caterina Della Mora, Marie Thérèse Mazzocca [email protected] +39 02 49905 631 | +39 335 1295 008 | +39 335 6709492
Media Relations Alessia Barrera, Sofia Crosta Ewelina Kolad +39 02 49905 616 |+39 340 3434 065 +48 42 272 82 90 [email protected]
Italy and International Press Poland and Central and Eastern Europe
| Assets items | 31-Dec-21 | 31-Dec-22 |
|---|---|---|
| Cash and cash equivalents | 554,467,803 | 634,879,242 |
| Financial assets measured at fair value through profit or loss | 36,598,343 | 90,540,554 |
| a) financial assets held for trading | 4,094,816 | 210,963 |
| b) financial assets designated at fair value | - | - |
| c) other financial assets mandatorily measured at fair value | 32,503,527 | 90,329,591 |
| Financial assets measured at fair value through Other Comprehensive Income |
83,505,780 | 128,097,995 |
| Financial assets measured at amortized cost | 10,069,496,866 | 11,895,850,418 |
| a) due from banks | 404,099,101 | 478,203,260 |
| b) due from customers | 9,665,397,765 | 11,417,647,158 |
| Hedging instruments | 13,098 | - |
| Equity investments | 13,483,781 | 13,655,906 |
| Property, plant, and equipment | 36,451,859 | 54,349,168 |
| Intangible assets | 67,547,298 | 70,154,575 |
| of which: goodwill | 30,874,236 | 30,956,911 |
| Tax assets | 100,518,550 | 60,707,458 |
| a) current | 41,389,440 | 513,588 |
| b) deferred | 59,129,110 | 60,193,870 |
| Other assets | 214,613,950 | 394,181,565 |
| Total consolidated assets | 11,176,697,328 13,342,416,883 |
| Liabilities and Equity items | 31-Dec-21 | 31-Dec-22 |
|---|---|---|
| Financial liabilities measured at amortized cost | 10,010,352,805 | 11,994,762,826 |
| a) deposits from banks | 795,053,359 | 1,166,365,115 |
| b) deposits from customers | 9,029,014,284 | 10,789,421,645 |
| c) securities issued | 186,285,162 | 38,976,066 |
| Financial Liabilities Held for Trading | 2,724,511 | 949,790 |
| Hedging derivatives | 4,814,350 | 14,313,592 |
| Tax liabilities | 100,684,173 | 136,002,627 |
| a) current | 5,027,559 | 30,997,504 |
| b) deferred | 95,656,614 | 105,005,123 |
| Other liabilities | 460,855,826 | 401,369,354 |
| Employee severance indemnities | 3,709,582 | 3,238,366 |
| Provisions for risks and charges: | 21,959,653 | 33,012,775 |
| a) guarantees provided and commitments | 293,721 | 251,282 |
| b) pension funds and similar obligations | 6,132,998 | 7,861,441 |
| c) other provisions | 15,532,934 | 24,900,052 |
| Valuation reserves | 5,268,845 | 6,852,891 |
| Additional Tier1 | - | 150.000.000 |
| Reserves | 166,903,826 | 233,153,339 |
| Interim dividend | - | (68.549.894) |
| Share premium | 66,492,997 | 66,277,204 |
| Share capital | 142,690,771 | 142,870,383 |
| Treasury shares | (7,132,434) | (3,883,976) |
| Profit (Loss) for the year | 197,372,423 | 232,047,606 |
| Total consolidated liabilities and equity | 11,176,697,328 13,342,416,883 |
| Profit & Loss items | 31-Dec-21 | 31-Dec-22 |
|---|---|---|
| Interest and similar income | 230,314,704 | 354,805,437 |
| Interest and similar expenses | (39,545,723) | (92,987,816) |
| Net interest income | 190,768,981 | 261,817,621 |
| Fee and commission income | 109,277,422 | 127,594,743 |
| Fee and commission expenses | (28,498,392) | (36,939,094) |
| Net fees and commissions | 80,779,030 | 90,655,649 |
| Dividend income and similar revenue | 3,675,911 | 9,794,598 |
| Gains/(Losses) on trading | 6,633,662 | 12,622,171 |
| Fair value adjustments in hedge accounting | (0) | - |
| Gains/(Losses) on disposals/repurchases of: | (12,649,882) | 165.940 |
| a) financial assets measured at amortized cost | (6) | 165.940 |
| b) financial assets measured at fair value through Other Comprehensive Income | - | - |
| c) financial liabilities | (12,649,876) | - |
| Net income from other financial assets & liabilities at FV | 2,733,566 | 5,154,401 |
| a) financial assets and liabilities designated at fair value | - | - |
| b) other financial assets compulsorily valued at fair value | 2,733,566 | 5,154,401 |
| Net banking income | 271,941,267 | 380,210,380 |
| Impairment (losses)/reversals on: | 196,904 | (5,905,199) |
| a) financial assets measured at amortised cost | 343,493 | (5,905,199) |
| b) financial assets measured at fair value through other comprehensive income | (146,589) | - |
| Net profit from financial and insurance activities | 272,138,171 | 374,305,181 |
| Administrative expenses | (170,365,575) | (170,602,997) |
| a) personnel costs | (73,233,590) | (74,351,758) |
| b) other administrative expenses | (97,131,985) | (96,251,239) |
| Net provisions for risks and charges | 2,265,324 | (10,535,096) |
| a) commitments and guarantees provided | 233,720 | 65,131 |
| b) other net provisions | 2,031,604 | (10,600,227) |
| Net (adjustments to)/writebacks on property, plant, and equipment | (5,132,422) | (5,005,378) |
| Net (adjustments to)/writebacks on intangible assets | (4,950,500) | (7,641,714) |
| Other operating (expenses)/income | 102,508,187 | 150,393,890 |
| Total operating expenses | (75,674,985) | (43,391,294) |
| Gains (Losses) on equity investments | 195,391 | 287,857 |
| Profit (Loss) before taxes from continuing operations | 196,658,577 | 331,201,744 |
| Income taxes on profit from continuing operations | 713,846 | (99,154,138) |
| Profit (Loss) after taxes from continuing operations | 197,372,423 | 232,047,606 |
| Profit (Loss) after taxes from discontinued operations | - | - |
| Profit (Loss) for the year | 197,372,423 | 232,047,606 |
6 Costs related to deferred employees' benefits, previously accounted in «Net provision for risks and LLP» are reclassified in «Personnel Expenses». FY 2021 restated also for the item «Fair value adjustments in hedge accounting» reclassified in «Gains / Losses on Trading» and in «Interest Expenses».
| Values in €m | 31-Dec-20 (BFF stand-alone) |
31-Dec-21 (BFF & DEPObank) |
31-Dec-22 (BFF & DEPObank) |
|---|---|---|---|
| Credit and Counterparty Risk | 96.6 | 123.2 | 160.2 |
| Market Risk | - | 0.3 | 0.0 |
| Operational Risk | 32.6 | 50.2 | 58.9 |
| Total capital requirements | 129.3 | 173.7 | 219.2 |
| Risk Weighted Assets (RWA) | 1,615.7 | 2,171.1 | 2,739.7 |
| CET 1 | 251.1 | 382.8 | 461.9 |
| Tier I | - | - | 150.0 |
| Tier II | 98.2 | 98.2 | - |
| Own Funds | 349.4 | 481.1 | 611.9 |
| CET 1 Capital ratio | 15.5% | 17.6% | 16.9% |
| Tier I Capital ratio | 15.5% | 17.6% | 22.3% |
| Total Capital ratio | 21.6% | 22.2% | 22.3% |
| 31-Dec-2022 (BFF & DEPObank) |
|||
|---|---|---|---|
| € 000 | Gross | Provisions | Net |
| Non-performing loans (NPLs) | 105,660 | (19,287) | 86,372 |
| Unlikely to pay | 16,374 | (4,241) | 12,132 |
| Past due | 185,971 | (714) | 185,257 |
| Total impaired assets | 308,005 | (24,243) | 283,762 |
| 30-Sep-2022 (BFF & DEPObank) |
|||
|---|---|---|---|
| € 000 | Gross | Provisions | Net |
| Non-performing loans (NPLs) | 102,912 | (16,942) | 85,970 |
| Unlikely to pay | 17,202 | (4,081) | 13,121 |
| Past due | 187,325 | (209) | 187,117 |
| Total impaired assets | 307,439 | (21,131) | 286,208 |
| 31-Dec-2021 (BFF & DEPObank) |
|||
|---|---|---|---|
| € 000 | Gross Provisions Net |
||
| Non-performing loans (NPLs) | 88,736 | (16,503) | 72,233 |
| Unlikely to pay | 17,505 | (5,092) | 12,413 |
| Past due | 19,486 | (58) | 19,428 |
| Total impaired assets | 125,727 | (21,652) | 104,075 |
| 31-Dec-2020 (BFF stand-alone) |
|||
|---|---|---|---|
| € 000 | Gross Provisions Net |
||
| Non-performing loans (NPLs) | 81,582 | (14,761) | 66,821 |
| Unlikely to pay | 18,743 | (3,040) | 15,703 |
| Past due | 42,232 | (127) | 42,105 |
| Total impaired assets | 142,557 | (17,928) | 124,629 |
| 31-Dec-2019 (BFF stand-alone) |
|||
|---|---|---|---|
| € 000 | Gross | Provisions | Net |
| Non-performing loans (NPLs) | 74,944 | (13,001) | 61,943 |
| Unlikely to pay | 11,836 | (2,310) | 9,526 |
| Past due | 34,780 | (88) | 34,691 |
| Total impaired assets | 121,560 | (15,400) | 106,160 |
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