Bff Bank Aktie

Good afternoon, and welcome to the BFF Banking Group First Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would like to turn the conference over to Caterina Della Mora, Head of Investor Relations; and Giuseppe Sica, Group CEO. Please go ahead.

Good afternoon, and thank you for joining BFF's First Quarter 2026 Financial Results Call. We will start with a presentation by our CEO, Giuseppe Sica, followed by Q&A. [Operator Instructions] Let me hand over now to Giuseppe Sica.

Thank you, Caterina, and thank you, everyone, for joining this call. Before we dive into the presentation, some of you may have already noticed that we have introduced some new formats and slides. This allows us to better illustrate the diversified nature of our group and to focus on the key drivers of our performance. You can still find for this quarter all the other details in the appendix.

Today, we are announcing what are good results in what remains a complex environment. Our profitability improved with adjusted net income significantly up year-on-year. This result is underpinned by the performance of our Payments and Security Services business, as well as factoring and lending, where we are focused on the profitability of our volumes.

As a result, we now meet CET1 and also our total capital ratio requirements. This is a significant, although expected change compared to what we have announced at our full year results. We continue to review options for our business model given the recent changes in portfolio classification and the need to address calendar provisioning.

We are focusing on maximizing value for all stakeholders. These actions will form part of our new strategic plan, which we will unveil in the second part of the year. Before going into numbers, let me remind you that while our full year results reflect the regulatory measure received by the Bank of Italy at the end of March, the Bank of Italy inspection is still ongoing.

Let us now look at our key financial metrics on Slide 3. ROE stayed well above 20% with all divisions contributing strongly to these results. Net income of EUR 43 million is up 24% year-on-year. The unadjusted net income is higher at around EUR 50 million. Let me remind you of our net income target for 2026 of EUR 115 million to EUR 140 million that we published on the 30th of April.

Our net profit in Q1 has been achieved, thanks to a revenue increase of around 20%. As I've said, our focus remains on profitability. Factoring and lending loans are down year-on-year, but as you will see, profitability is up.

Transaction services deposit is only slightly down, mainly due to one client, which remains with us, but has adjusted its liquidity needs. Our extremely strong loan-to-deposit ratio has remained stable at 76% and REPOs are down. Finally, our CET1 is up 1.1% compared to full year numbers.

Moving to the next slide. I won't spend much time on this one, but let me stress that we have achieved this 24% increase in net profit in a rather complex quarter. Importantly, we have achieved this mainly through an increase in revenues. Costs are up as we continue to invest as our provisions, and we have taken a more conservative approach.

On Slide 5, as you can see, all business divisions contribute to profitability with Payments and Security Services generating EUR 14 million in PBT, up 25% year-on-year.

As I have previously mentioned, the earnings potential for these 2 divisions would be materially higher if we invested liquidity in Italian government bonds. In this case, these 2 divisions would have achieved EUR 31 million in PBT in the first quarter. Again, let me remind you that we are the leader in both payments and security services in Italy in the niches where we operate.

These activities have virtually 0 RWA absorption. In payments, we intermediate more than 130 banks and payment institutions. And in Security Services and specifically in the pension funds niche, we have an estimated market share above 50%.

Factoring PBT is up on improved margins. And the PBT for the Corporate Center rose to EUR 10.7 million, thanks to lower rates in our HTC portfolio. Moving now to Slide 6. I have already mentioned our diversified sources of profit. And on this slide, you can see that BFF is also diversified in terms of net revenues.

More than 60% of the net revenues in the first quarter were generated by activities outside of core factoring. And again, the contribution from Payments and Security Services would have been EUR 16.5 million higher if liquidity had been invested in Italian government bonds.

Slide 7 is also a key slide. Our net interest income is diversified. The HTC portfolio contribution is going up and will go up materially as our fixed rate portfolio at 0.6% yield will expire.

Importantly, the net spread of our factoring and lending has gone up from 3.6% to 4.2% as we have been very disciplined on the price at which we buy invoices. We have reduced the scheduling and reduced the cost of funding. You will find usual details in the appendix.

Let's move to Slide 8 to look at the net fee and commission income. This is another point that positively demonstrates BFF's diversified business model and the growth across our business divisions. In Security Services, this was driven by strong commercial activity in the first quarter.

In payments, we won new clients and are looking at a healthy pipeline. Finally, in factoring and lending, we have seen growth in the servicing of third-party portfolios. Looking at costs on Slide 9. We continue to focus on cost discipline with investments in the businesses focused on our transformation.

This includes higher HR costs as we hire talent to support change. In payments, rising expenses reflect higher volumes. Taking this into account, we still maintained our cost income ratio at 42%, significantly down year-on-year.

Slide 10 is focused on our commercial performance, which is reflective of our actions. Security services deposits have grown compared to year-end. This also confirms our strong liquidity position, which I will show in more detail shortly.

Payments. The reduction in deposits is largely driven by a single counterparty that remains a client, as I mentioned in the introduction. We have also onboarded new clients and will continue to do so in the second quarter. In factoring and lending, I already mentioned that we are focusing on the quality of volumes and improving collections.

This combination led to a small reduction in loans, which will continue over the next few quarters as we communicated on the 30th of April. Moving now to Slide 11. Unrealized gains on our variable rate portfolio are at around EUR 60 million, which corresponds to around 1 percentage point common equity Tier 1 and is not included in our capital projections.

On the other hand, we still have a 2.5% negative headwind on the EUR 1 billion fixed rate portfolio. We expect, therefore, an around EUR 25 million increase in PBT as these mature. Moving to our customer loan portfolio on Slide 12. Our activities are diversified both in terms of type and geography. Factoring accounts for around half the total loan book and is spread across 6 countries in Europe.

I would like to highlight that we see further room for diversification with growth potential in activities outside of PA factoring, always in areas with low credit risk. Looking at our impaired loans ratio on Slide 13. Let me make a few comments.

We have a net impaired loans of 73% with 96% of the impaired loans represented by the public administration and therefore, with limited credit risk. Post year-end actions, our coverage of nonperforming loans has increased to 80%. Importantly, we have reduced the portfolio of Italian negative court rulings by 14% in effectively 2 months, including using the option of retrocessions.

Slide 14 shows the quality of our origination and collections. Let me highlight the quality of what we buy. We have collected 91% of all invoices we acquired in 2025. The outstandings are largely from the fourth quarter, in line with our around 180 days DSO.

This slide is important because it shows how we can manage capital. For instance, in first quarter, we have collected around EUR 1 billion of past due exposure or EUR 1.5 billion RWA reduction, corresponding to a common equity Tier 1 generation of almost 3 percentage points.

Slide 15 shows how disciplined we have been in managing liquidity. Cost of funding, including the cost of bonds is down as the spread versus Euribor. Excluding bonds, we would be funding ourselves below Euribor. REPOs are down. Both LCR and NSFR has improved. Our RWA absorption is very high, and this is a key driver of the strategic review currently underway.

Nonetheless, on Slide 16, thanks to capital generation in the first quarter, both CET1 and TCR at 11% and 13.4%, respectively, are above SREP. These figures are presented, including the net profit for the first quarter, which will be formally added following the approval of the annual report at the AGM on the 16th of June.

Organic capital generation for the quarter was around 100 basis points or around EUR 60 million. Now on the key takeaways, a quick summary of the set of results before we move to the Q&A. Our first quarter results show that BFF is a diversified business with all divisions contributing to profitability.

We maintain our net income target for 2026 of EUR 115 million to EUR 140 million that we published on the 30th of April. We are focused on improving profitability in factoring and lending, and we are seeing positive results. We meet our CET1 and also our total capital ratio requirements. While [indiscernible] inspection is still ongoing, we are working on our strategic options to optimize the business model for the future to the benefit of all stakeholders, and we present the new strategy in the second half of the year. Thank you for your attention, and let me now open to Q&A.

[Operator Instructions] The first question comes from Manuela Meroni of Intesa.

The first one is on the contaging portfolio. Could you please share with us the amount of your contaging portfolio? And what is the portion that where you are going to apply the calendar provisioning starting from the third quarter of this year and the portion where you have to apply the calendar provision starting from the first quarter 2028.

The second question is on the possible strategic options and the securitization that you are starting. So I'm wondering if you can share with us the main characteristics of the securitizations in terms of size, tranching and impact on the P&L, both one-off or recurring? And what are the possible strategic options that you have in mind?

And the third question is on the coupon of the AT1. I just want to know if you can confirm the payment of the coupon.

Thank you, Manuela. I'll try to address the questions to the best of my possibility. On the contingent portfolio, as you have seen also from the appendix, we have removed the split. And the reason for us to remove the split is that after the portfolio reclassification, of course, the number would be higher and would also include a significant amount of LTI, which stay on our balance sheet for longer.

And that's the one area where the securitization would be focused. The contaging portfolio, according to the old definition, continues to go down in line or frankly, a bit better than previous quarter. And that's the part where the calendar provisioning would be applied in 2026.

And what is important is to confirm what we said, what we wrote on our press release on the 30th of April that we expect to respect capital ratios, including the impact of calendar provision for 2026. On the securitization, I would prefer to give more detail as we have more details, particularly with reference to price.

But let me be clear that we are not doing this transaction focusing on the P&L impact. We are doing this transaction focusing on the capital impact. And in particular, compared to reclassification effected on the 30th of April, the securitization would also include a significant component of API which would go in calendar in 2028 due to the classification, therefore, you would also see a material impact on the capital impact expected for that year.

On the coupon of the AT1, formally, as I said on the call, the ratios cannot include the earnings for the quarter, which will be included after approval from the AGM in which case the MDA would allow the payment of the AT1 coupon.

Let me remind that, however, will be announced towards the end of July. We have, therefore, a few months before we get there.

The next question is from Tomasso Nieddu, Kepler Cheuvreux.

I have just a couple. The first one on the results. Actually, Q1 results looks, I would say, optically strong if you compare with the full year guidance you provided. And in particular, factoring profit before taxes increased slightly despite the volumes and the book decline.

So my question is, is the message that BFF can actually generate stable profitability on a smaller but more profitable portfolio and again, on the volume decline, however, I would have expected to see a decline in Italy, especially, but I see down double digit also Spain and Greece. So can you maybe give us more color by country on the volume?

Thank you, Tommaso. On the profitability, we have -- and that's why I repeated a couple of times during my call, we have reiterated the target for the full year. And the reason why you can't simply multiply by 4 is that as we wrote on the 30th of April, we are going to manage loans down.

Could BFF provide a stable and interesting level of profitability without being capital constrained? Yes, it could. And this is what we have to work on the -- by looking at the strategic options, which I would say are really focused on reducing the impact of the calendar and reducing the RWA density.

On the volumes, I think I said probably from my first or second call that the focus would be on profitability and collections rather than increasing volumes, at least for this phase, and this is what we have been trying to do. Certainly, Spain and Greece could have done better. And I think particularly Spain performed below our expectations.

The reality is that payment times have been good in Spain. Spain remains for us a very important market because we have a very good track record of LPI collection. So despite lower volumes, actually, the profitability of the country remains very important for us.

The next question is from Giovanni Razzoli, Deutsche Bank.

I have 3 questions. There are 2 clarifications. Firstly, if I look at Slide #30, so when you provide the details of your divisional database, I've seen that you had in the quarter, EUR 11 million of gain on trading and also some profits from disposal of assets at amortized cost in the region of EUR 11 million each.

Can you please clarify what are the transactions that you implemented here, what assets have you sold? And whether shall we consider those items as nonrecurring going forward? The second question is on Slide 27. I've seen that you have reported here EUR 1 billion of collection on the portfolio.

I don't know whether there is the type as there is -- I should interpret this as a quarter-on-quarter collections. I mean you have collected EUR 1 billion on the past due from the beginning of the year up to March of 2026, so in 3 months. So whether this understanding is correctly because the agenda is a little bit confusing here.

And shall I compare this with the EUR 384 million that you reported last year in the same period of time, same slide. I ask you this because I think that you had a quite nice decrease in the stock of past due here in 1 quarter. So I wanted to understand whether this is a like-for-like trend or not?

And the third question is on the deposit from payment business. You mentioned it was down around EUR 700 million quarter-on-quarter. You had decrease in the business from one client, which has basically remain a client, but has reduced the cash with you. I'm quite surprised to be fair, with this trend because I would have considered the payment business as one of the stickier part of your funding base. If you can please elaborate on this trend?

And then you mentioned that in the second quarter, you have acquired a new client in the payment business, if I'm not mistaken. So what is the balance between the loss of EUR 700 million of funding from this client and the potential positive impact of funding from this other new client?

Giovanni. I start with the easier question, which is, yes, it's from -- on Slide 27, it's from December to March 2026. We have collected EUR 1.1 billion of past due, which is EUR 1.6 billion of risk-weighted assets, which would be at 13%, EUR 180 million, EUR 190 million of capital. Is it like-for-like, the methodology for calculation is the same, but the base of past due is much higher because effectively, all of our portfolio is now in past due, not all of it, but most of our factoring portfolio is in past due.

Sorry, Giuseppe, you mean that, I mean, given the very strong reclassification that you had at year-end, with the previous approach, part of that wouldn't have been falling into the past due category. This is what we know.

Yes. On the gains, losses, I have to look at the various voice that you are discussing. I think it's all recurring in my mind. We have realized EUR 6.9 million gain, which would be around EUR 4 million post tax on HTC. We can do more during the year.

It's consistent with our [indiscernible] to collect policy. That's the only part where one can judge whether it's recurring or not. It's perfectly in line with previous year's average.

Sorry, my bad, there was EUR 10 million of provision -- reversal of provisions, if I see below.

Okay. Yes. Okay. Now that's clear. It's a minus and plus that compensate each other. So the net impact on P&L is not relevant effect provision for charges to provision for credit. That's what has happened. It is not relevant to the final P&L. On the clients, that was -- obviously, given the amount was a very large client, which was leaving part of its excess liquidity with us and have decided not to do so.

The rest, I agree with you is very stable because it's driven by the intermediation. The balance, the clients that we have -- we will make probably some announcement towards the end of the month of some important and visible clients that we are arranging in payments will not compensate the liquidity we lost from this single one.

The next question is from Davide Giuliano of Equita.

I have 3. The first one on the evolution of deposits in the Payments and Security Services division, we commented on first Q. My question was a little bit more about today. And if you look at the 2 divisions combined, how would the situation look today rather than at the end of first -- the second one on factoring and lending division. Can you comment on why we are still seeing negative over recoveries this quarter despite the model changes implemented at the end of last year?

It seems that the impact continues to come from rescheduling. Is there a risk of further model revisions going forward? And the third one is just a clarification on loan loss provision, which are relatively high at least compared to my expectation. Can you provide some color on the drivers behind this provision and what we should expect in the coming quarters?

If you can give us more precise guidance on cost of risk for 2026, just to double check is the reclassification you were mentioning before to the previous question.

[indiscernible] on the liquidity, you heard me talking about our strong liquidity. I don't want to provide more up-to-date information, which will come with the first half, but that should be an answer, I think. On the factoring and lending, listen, for me, what is very important is the very strong increase in the spread, which we are showing now for the first time.

You can see the increase which has gone there, the scheduling, if you look at the change year-on-year have gone down significantly. So I would say I feel that is a good result. On the cost of risk, I don't know why you say it's particularly high. We have 6.4 basis points on Slide 13.

A footnote explaining the EUR 10 million that Giovanni was asking a few moments ago. So I don't think it's particularly high. In fact, I think in terms of basis points could be higher in the next few quarters.

We have been disciplined in reducing -- let me say this cost of risk also includes the impact of negative sentences, by the way, for the first time this year. So we have been very disciplined in the retrocessions. We have to see how good we are in those in the next few quarters.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Giuseppe Sica for any closing remarks.

I thank everybody for joining, the call was a bit shorter than the previous one, and we look forward to speaking again when we will present our first half results. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to BFF Banking Group Market Update Call. [Operator Instructions] Please note this event is being recorded. I would like to turn the conference over to Giuseppe Sica, Group CEO. Please go ahead.

Good afternoon, everyone, and thank you for joining today's market update call following the publication of our press release regarding the approval of the draft annual report and the consolidated financial statements as of 31st of December 2025. As you will have seen in the press release, the figures released today include the changes compared to the consolidated financial accounts presented on the 10th of February 2026 and take into account the effects of the initiatives adopted by the bank following the Bank of Italy's regulatory measure. Let me remind you that we will publish our first quarter 2026 results and host a call on the 11th of May, and we will provide detail related to this period. I would like to take a moment to walk you through the key updates in today's announcement before we open the call to Q&A. There are four key elements that led to changes compared to the numbers presented on the 10th of February.

First, the reclassification of factoring exposure in past due resulted in an increase of EUR 1.4 billion. The reclassification includes two components. The first is related to the inclusion of late payment interest accrued and not yet collected in past due exposures. This results in the classification as net past due of a total amount of EUR 770 million. The second component reflects the adoption of a more stringent interpretation in the use of mitigation tools to suspend the calculation of past due days. And this has led to a reclassification of further EUR 590 million. Please note that the potential calendar provisioning would be applied starting from the first quarter of 2028, consistently with the methodologies adopted in previous years.

Second, we took further provisions of EUR 29 million related to negative court rulings. Following the regulatory measure and within the framework of the new internal policy adopted in February 2026, we've applied even stricter valuation criteria on negative court rulings. As a result, total provisions for negative court rulings as of 31st of December amount to EUR 104 million.

Third, higher provisions on certain nonperforming exposure amounted to EUR 16.4 million. This covers both direct exposure and legal actions against debtors with assigners subject to insolvency proceedings. And finally, there was, as already anticipated in our previous press release, EUR 3.4 million from the updated restatement of 2024 financial statements arising from cash allocation within the factoring and lending business. Let me say that all these four elements were already present in our press release following Bank of Italy measure and this is a quantification of those impacts. Let me now explain the impact of these changes on the profit and loss and balance sheet items as well as the key metrics for our asset quality and capital position. The 2025 adjusted net profit stands at EUR 140 million and the reported net profit at EUR 37 million.

The year-on-year development for the latter is primarily attributable to the impact of nonrecurring items. Let me also emphasize the underlying business trends presented in February haven't changed. Our deposits in transaction services have grown 15% year-on-year. And PBT for the division has risen to around EUR 50 million, which would be significantly higher if the liquidity were to be invested in BTPs compared to the current EURIBOR remuneration. So for instance, payments will generate a PBT of around EUR 70 million by investing in Italian government bonds and security services will generate EUR 50 million PBT by investing in Italian government bonds. Regarding the loan book, our focus, and I will comment on that in a moment, is on profitability rather than pure growth. Let me move to the balance sheet. As of 31st of December 2025, consolidated total assets were EUR 12.13 billion and Italian government bonds represent around 40% of our total assets. These are risk-free and the associated capital gain deriving from the mark-to-market is not included in any of our projections. Regarding BFF past due exposure following the reclassification, the net past due amount at the end of 2025 amounted to approximately EUR 3 billion, which is the vast majority of our loan book.

It's important to stress, as somebody else has noted that despite the development in the past due ratio, the underlying risk remains small due to the exposure being entirely towards the public administration. When you talk about underlying risk is the underlying credit risk. Finally, let me talk -- let me walk you through the updated capital ratios as of December 2025. The CET1 stands at 9.94%, above the SREP requirement of 9.80%, while the total capital ratio stands at 12.3% compared to 13.3% SREP requirements. As a result of this minor miss on the total capital ratio, the Board of Directors has approved today a capital conservation plan to be sent to the regulator to ensure stronger oversight and greater effectiveness of the remedial actions we will take. And let me remind you that we take these actions with the commissioners present in our Board and the commissioners have also participated in the drafting of the -- in the sessions of the Board related to drafting of the annual reports. Based on our projections, there is no capital shortfall compared to SREP requirements neither in 2026 nor in 2027, assuming a slight deceleration of volumes in these 2 years. So we have 2 years to address any potential shortfall in 2028, which may derive from kind of provisioning.

We have prepared and discussed specific recovery measures and alternative scenarios that allow us to mitigate the risk for 2028, and we are working on a number of initiatives with leading advisers. The actions aim at enhancing the value of specific assets and portfolios and the reference here is made to securitization. The focus remains on maximizing value creation -- and in this context, we have awarded mandates to Mediobanca and Morgan Stanley, while JPMorgan and PwC continue to work on the potential securitization. Let me now close with a few remarks on 2026. Our targets have been updated to take into account the more conservative development of volumes, which is part of the recovery plan. Despite the slowdown in volumes, we forecast an adjusted net income between EUR 115 million and EUR 140 million and a return on tangible equity between 15% and 20% -- of course, this does not affect -- does not take into account the effects, which we expect to be positive on capital of any possible securitization. Thank you for your attention. Let me now open the floor for Q&A.

[Operator Instructions] The first question comes from [ Ibrahim Saeed ], JPMorgan.

Just a couple for me, please. First, could you share some color on the deposit activity, in particular, on the transactions business in the last few weeks and certainly in Q1. Also, if you can give any guidance on your spot capital position today. Obviously, you had the benefit of four months of operating performance in Q1 and in April. Obviously, everyone will want to know what you can say about the AT1 coupon and if you can pay it? And if not, what remedial measures are available to you? And if I understood correctly, the securitization plan is still ongoing in parallel with what we're seeing now on potential M&A kind of headlines? And then just a final one, if you could say anything about the solo capital position as well, please?

Thank you. It's a lot of questions. Some of these are not easy to answer because I -- as I said, we report the first quarter results, and I'm very happy to invite you to the first quarter results on the 11th of May, but I cannot make explicit reference to that. However, there were some costs affect me on -- at the end of March, since the liquidity was fully under control. Also cannot make reference on the current capital ratios, but -- as we said in the press release, we don't expect any bridge of capital requirements in 2026. So the trajectory is a positive one. On the AT1, I understand the question. The AT1 is based because the coupon is paid in July is based on numbers of the first quarter. So we will disclose them then. But as I said, the trajectory is a positive one on capital generally. We respect all the regulatory requirements at a level at the moment. On the security -- on the securitization, we keep working. Of course, the perimeter is under review given the changes that we've applied to our past due classification at the end of March.

And sorry, just one follow-up question. With respect to the investigation that was ongoing at the time of your last -- when it was last reported, is that now concluded, i.e., is what we're seeing now the full extent of the measures suggested by the Bank of Italy? Or is there investigation still ongoing?

Are you referring to the investigation on the investigation, we are on the receiving end of any finding that the court may have. At the moment, we have received no communication. And so it's still a preliminary investigation.

The next question comes from Luigi Tramontana with Kepler Cheuvreux.

My questions relate to the capital plan that you approved today and sent to the supervisors. We have been reading in the press that you may consider selling some of your activities, in particular, in the payment services and in security services. Can you please confirm these rumors or not? And alternatively, which measures will you consider?

I have not -- I've read these rumors and I've never said anything to that extent. And that is certainly not part of our recovery plan any disposal of the payments or of the depository bank activity. I think there was an article today on the press saying that these two activities continue to operate normally and have given you some indication of the underlying level of profitability of these two divisions. As there has been no deliberation from the Board on specific actions, I'm not able to comment on other assets that we may consider disposing. Let me be clear that normally, the consideration going concerned are based on a 12-month horizon.

On a 12-month horizon, we don't have any bridge on 24-month horizon, we don't have any bridge. We may have, if we don't do anything, a small bridge in 2028. So we have 3 years to take any action that may be needed.

The next question comes from Domenico Maggio with Jefferies.

Are your deposits from the securities business conditional on having an [ IG ] rating? And are this demand deposits, what I'm after is basically how quickly can the deposit go? And you mentioned it seems like you don't not want to clearly answer on the -- whether the AT1 coupon will be paid or not, something to wait for Q1. But in your capital conservation plan, do you include the eventuality of coupon skip? I would think that you would be making a pretty low savings on the interest, just around EUR 1 million. So I was wondering whether that was included on the capital conservation plan. Yes. That's all my two questions.

On the AT1, I don't have much to add. I told you the trajectory is positive, but we have to see when the first quarter results.

Is it on the conservation capital plan, the eventuality of not paying or...

We don't give all the details. fortunately you have to wait 10 days.

Okay. Fine. I understand. And on the deposits from the securities business?

Deposits from the securities business, only a small portion of the deposits from the securities business is depending on having an IG rating. However, any clients can leave at any moment or better. They can decide to leave, which means they could decide to change depository bank, which is not an easy or quick process. So unfortunately, even if I still have an investment grade, some clients have may leave. But as I was quoted on the press at the end of February, I said that liquidity is absolutely under control. So I hope I have answered this question.

And the portion that you mentioned, you mentioned a small portion is demand deposits. Could you quantify or give a rough number on the percentage of EUR 4.5 billion?

It's -- what I can tell you without giving numbers because I cannot give you numbers is that it's less than the volumes of factoring that they buy in amount. So even if I lose suddenly and you don't lose suddenly because this means that somebody may have to decide to initiate a process to change the depository bank and then select the depository bank and then transfer its funds and assets to the other depository bank. So it's not an overnight process. What I'm telling you is that the liquidity that I may lose as a result of non investment grade is lower than the volumes of factoring that I buy in a month.

So in other words, if I lose liquidity, I can just not buy for a couple of weeks. I don't see that scenario, frankly. The reduction of volumes that I have -- that we have in our recovery plan is a slowdown in volumes rather than anything else. So that's why I made a comment that I prefer to focus on profitable volumes just rather than on volumes grow.

Just one follow-up. You were asked before on the solo capital figure and said you're going to wait for Q1. But don't you typically disclose the solo capital figure with the annual report? So shouldn't that be... Today.

No. Sorry, I never said we will wait for the Q1.

Sorry, maybe I misunderstood.

No, I never said to wait. Of course, the solo figures will be included in the annual report. We will expect all the binding measures and we have [more] bridge of the total [indiscernible], [SREP] trajectory, I expect it to be positive over time certainly in our projections with no bridge at the end of 2026.

How was small, if I may ask on the -- only on the total capital and was bridge...

Just one second, I think it's less than 1%.

Less than 1%. Okay. Just last one, a follow-up, sorry, then will be honestly the last one. On your capital projection.

Sorry, significantly less than 1%.

Significantly less than 1%. Okay. Is there a need to do a securitization before the end of 2026 to get that capital projection being positive and the bridge to disappear? And one last question, like linked to that, would you need to basically underwrite less business, I guess, to maintain that capital position or that positive capital projection. I think I got that from some of the comments you previously made on lower business volume and so on.

Yes. So we don't need the securitization, either in 2026 nor in 2027 to respect all capital ratios in our projections. Yes, as I said, it's a slight slowdown in volumes, which is fine. You still see the level of profitability that we have there is not what it used to be, but it's still a very decent level of [indiscernible].

The next question comes from Sharada Patel with Citi.

Just off the back of Ibrahim's question. So the Bank of Italy investigation is still ongoing as per the press release today. So does the 2026 guidance include any expectation of one-off charges or further restatements? Or can we assume that all remediation actions have been fully completed? That's my first one.

No, I think -- sorry, maybe there was a misunderstanding. When I responded to Ibrahim's question, I was referring to the preliminary investigation by the Court of Milan. I was not referring to Bank of Italy inspection, but then I take the opportunity to respond about Bank of Italy. So as we read in the press release, the inspection is still ongoing. we have received this temporary or preliminary report, which is reflected in our report. Of course, I cannot may ask for some small adjustments, I hope. The range that we give is a relatively wide range in terms of profitability. Now at the moment, I think my past due ratio at the level of Italy is around 80%, 90%. So little room for major changes in our RWA. So I feel that the range that we have given may take into account what may come, which we don't know at the moment.

Okay. And given the timing, obviously, we're coming up just 10 days before the first quarter. Can we assume that then if in the kind of past couple of weeks, you've had to take kind of more restatements and so on that, that was kind of backdated on to the 2025 accounts, i.e., in 1Q, we shouldn't expect to see any one-off charges or restatements?

I don't want to talk about 1Q. I think we have taken -- the Board believes we have taken what needed to be taken for year-end 2025. I don't think we can backdate things. We have taken a more conservative approach on things generally.

Okay. And then my second question would be, obviously, also since February, you've done another EUR 60 million top-up of NPE provisions. But relative to the potential calendar provisioning impact coming in September, it's still obviously quite small. And as I understand it, the guidance doesn't assume any securitization. So can I get your expectations for assuming no external actions or securitization, what the timing of those calendar provision impacts for 2026 will be? Is it kind of lump just in the third quarter or the second quarter?

The projections are based on third quarter, which is our interpretation. So the impact of this classified portfolio of the portfolio that was reclassified in 2024 is starting to come through.

Yes. And so given that, in September, you'll have some calendar provisioning needs up to 35% from 2024. Can we assume then that provisions for NPEs absent any securitization will continue to increase up till September this year?

Listen, the provisions that we took are not related to calendar provisioning at all. They're not related to calendar provisioning.

So why haven't calendar provisioning -- provisions been topped up then?

But calendar provisioning is not even an accounting measure. This is reflected directly into capital. So you will not even see it in our P&L. The calendar provisioning is a purely prudential measure, which exists in the does not exist in the U.S., but it's not an accounting measure. We couldn't possibly do that.

Have you taken any further than on the capital impact? As I understand in February, there were EUR 50 million of calendar provisioning.

That's the number. The number has not changed.

Okay. And then my third question was on the negative court rulings. There's another obviously provision top-up. Does that reflect the success in your court appeals currently, like what you've seen so far year-to-date?

I think what I have said in previous calls is that we were assuming just to go a bit more, we're assuming in second degree order, we would overturn a very small minority of judgments. Now we are saying that for specific case, we are never overturning a judgment in second degree.

You mind repeating that?

We are -- if we look for specific cases, we are assuming that if we lose in first order in court, we 100% lose also in second order. That's what our assumptions have at the moment, which means if we are a bit better than that, then we should recover something.

Okay. And then my final question is just to clarify off the back of what you were saying with Domenico. So you expect to bridge the total capital SREP is that in 2026 by significantly less than 1%?

No, no, no. I said I was talking about the 2025 individual capital ratios. That's what I was talking about. We don't have any bridge in 2026 based on our projections.

Okay. And then off the back of that, just to confirm, the AT1 coupon depends on the group and all the solo requirements, i.e., even if the solo requirements are met, that the group is bridgeed, that has an impact on the AT1.

From the group.

The next question comes from Giovanni Razzoli with Deutsche Bank.

I have first question. The line of the answer so far was very bad. So if you can also please try to improve it because I struggle to understand most of your answers. So first question is on the EUR 28 million of additional provisions on the amount of receivables that were already part of the EUR 72 million and the EUR 16 million of incremental provision on NPLs. You mentioned strict classification policies, but can you please be more precise or as precise as possible to give the market the possibility to understand why just a couple of months after this EUR 72 million provision, you had to take another EUR 28 million on top another [EUR 60 million] on NPLs. And specifically on this EUR 16 million of provision, what is the amount of loans which drove these provisions?

The second question is on the securitization plan. You are still working on it. But while you are working, your numbers continue to be revised downwards, the provisions increase and the market has no concrete backstop plan.

Can you provide us with a reasonable time frame to fix your capital provision from here? I understand that there are many external factors which can impact the answer, but in my view, the market needs to know at least a reasonable time frame to fix this position because it seems to me that to be fair, a capital increase now becomes a very, very concrete options because the securitization is part of the plan that is ongoing for quite a long time and your seems to be still far from there.

Third question on the bridge temporary bridge of the total capital requirement. I was wondering if the guidance for net profit for 2026 is included in your guidance that you will instead be compliant with the SREP in 2026. And the final question is a very top-down one. Given the amount and the scope of the reclassification of the past due loans, it seems to me that you are applying a scenario where from the [181st] day since the purchase of receivable that is not paid, that amount is in past due.

If I look at the magnitude of the amount of the past due that you have [delinquency] the Italian stock of loans. Is my understanding correct? And this seems to be now the approach of the regulator. Is my understanding correct?

Thank you, Giovanni. I try to shout if the line is not good, we will try to fit it. On the provisions, I have given -- the key change on the negative sentences. As I said, we are now assuming that we do not overturn judgment in second degree. We had a small percentage before. This is the impact. It's more conservative. And as you have seen on the last press release, following the [provedinento] by Bank of Italy, there was in their [provedinento] an analysis on these provisions. So we have done our work and taken a more conservative stance. We have also taken some provisions on what are nonperforming clients. These nonperforming clients are clients to which we may not even have a direct exposure, actually largely our clients towards which we do not have a direct exposure, but where we have the risk that even if we have a positive sentence and we face to collect and we have to put back the receivables, we may have problems in collecting them. So I think it's a very conservative approach to what is not even often a direct exposure.

So -- so I mean, I don't understand why if you have to put back the loan to your clients, you had to take a provision on it. Is it because...

If the client -- there are clients that are nonperforming, okay, over time. Although we largely work with multinationals, there may be clients that are nonperforming. And in these cases, we conservatively take the provision often even without having a direct exposure to those clients, okay? On the securitization, listen, I share your frustration, but I never said that I would do the securitization in the first quarter I never said that I would do the securitization in the second quarter. So I don't give you the time line. But while I've done many securitizations in my career, this takes a bit longer. I never said first quarter and I never said second quarter.

I obviously don't comment on your view of the capital increase, which is your view, the capital increase is definitely not a part of our recovery plan. We don't have any bridge of capital requirements based on our estimates in 2026, and that includes, of course, the total capital ratios. On the past due, the situation is frankly even worse than the one that you depict because basically, whatever we buy, we buy directly in past due given that there is this 1% PPA rule. But generally, you're right that's a European rule on the 180 days towards PA.

And sorry, can you share with us on the EUR 16 million of provisions on those debtors which went bankrupt on those large organizations, which went bankrupt. What is the amount of the scope of the portfolio which drove this EUR 16 million...

It's -- listen, this is the top. So this is not the full provisions. We don't disclose the full provision, but it's a very significant provision for clients to which we don't have direct exposure.

The next question comes from Davide Giuliano with Equita.

First one is on the SREP requirements. Can you provide some details on the reasons why you do not expect a bridge of the SREP requirements in 2026 and 2027, considering the calendar provisioning that is expected in September 2026? Is it all related to volume downsizing? And can you confirm that calendar provisioning will kick in, in and not in June relative to the position that were reclassified in 2024?

The second one on the business, how do you expect your long-term profitability to be affected given that you are now required to classify LPIs as well within past due? Do you see this business still profitable? And can you disclose LPI booked in P&L in NII, specifically in full year 2025? And the last one, in the press release, you said that you will consider new, let's say, operating modalities in factoring for the future. Can you explain a little bit better what do you mean by the new operating modalities in factoring?

Is, on the capital generation, we are now in -- we are discussing year-end results 2025. So 18 months have passed since the reclassification and we have reduced the 2026 calendar provisioning by over 60%. And we have other three quarters ahead of us. So we have a very focused machine on the reduction of calendar provisioning. And our estimates embed the forecast that we have on calendar provisioning. They also embed the profitability of the business.

And -- while previously, we had a significant growth in volumes, we now are trying to be more disciplined also from a pricing perspective on new volumes. So this is the way we see the business evolving in 2026 and generally also in 2027 with the calendar from the reclassified portfolio in Q3 2026 starting to kick off. On the business model, I think we talk about the securitization. And of course, the securitization will have to include a higher proportion of [LPI] than previously thought because we collect capital very, very quickly. I think we have collected by now all -- almost all, if not all, the portfolio that we bought in 2025. So that is never going to go in calendar. LPIs are a different story, and we have to manage those more efficiently. And then what that means we have to see in the context of the new strategic plan.

I don't -- I will get back to you on the LPI because I'm not sure we disclosed that to the to the market. But yes, listen, I know what I can tell you is that there is a legend which I heard many times from investors that there is a huge difference between the -- what we collect and what we accrue. I can tell you that it's not a huge difference...

Yes. Sorry, just a follow-up on the new operating modalities in factoring and sorry, again on LPIs in the sense that now that you are essentially obliged by the Bank of Italy to reclassify immediately LPIs into NPEs, of course, they will get 150% risk weight compared to the, I don't know, 20% in the past, the weight it was. So it's a completely different return on risk-weighted assets and thus on allocated capital. So I was wondering if in the coming future, you could consider essentially not to ask for LPIs or just to change business model, let's say, to a more traditional factoring.

Your calculations are mathematically correct, okay? Now let me stress. We have three businesses in which we are market leaders, that have no RWA, no risk absorption and create liquidity. One, which has, at the moment, a higher risk absorption, but it responds to client needs and in which we are market leaders. And I think as we say, we have -- in the press release, we have to find new ways to make this business more profitable from a capital absorption perspective. And I think this will be part of the strategic plan that we will have to present.

The next question comes from [indiscernible] with [indiscernible] .

Well, I read that you basically were in bridge to MREL requirement too. So I'm wondering if you are well in a position to think about issuing new senior or well, how do you see your access to debt capital markets today and about the well, same question, your thinking about your thoughts about what is going to happen to these securities.

We don't -- first of all, we do not reach the regulatory binding requirement we bridgeed the CBR as you know...

You need to be compliant to the -- well...

Slightly different. We said that based on our estimates, we will have no bridge by year-end without external measures. To be clear, and obviously, then the press release was not very clear, external measures involve anything that implies going on the market. So our estimates don't include the issuance of any debt securities, neither senior or AT1 or nothing.

Okay. So basically, you expect well to pay the coupon of the AT1 are you thinking about that? Is it included in your guidance or in your recovery plan?

As I said, the coupon of the AT1 will be determined on the date as of first quarter, which we released on the 11th of May.

Okay. So no color today about that.

Unfortunately, we need to wait 10 days...

The next question is a follow-up from Giovanni Razzoli with Deutsche Bank.

Yes. Very quick follow-up on the SREP at year-end and your total capital ratio at year-end. In the press release, you mentioned that you won't be in bridge of the SREP at year-end without the external measures. So I interpret this that you don't expect -- you have not factoring any securitization, the effect of any securitization in that target, right? So just the capital generation, organic generation.

Yes, that's correct.

This concludes our question-and-answer session. I would like to turn the conference back over to Giuseppe Sica for any closing remarks.

I thank everyone for taking part in today's call and for the interesting questions and look forward to speaking again on the 11th of May. Thank you again.

Good afternoon, and welcome to the BFF Banking Group Market Update Call. [Operator Instructions] Please note, this event is being recorded. I would like to turn the conference over to Mr. Giuseppe Sica, Group CEO. Please go ahead.

Thank you. Thank you for the introduction, and thanks for everyone who joined the call. First of all, let me reiterate that we have received the measure by Bank of Italy that we have announced last Saturday. And we have announced promptly everything that was relevant to the market. The Bank of Italy is still working on this general on-site inspection.

What is the measure? The measure is the appointment of 2 temporary commissioners, Raffaele Lener and Francesco Fioretto. Their role is to support the Board of Directors and the management on a temporary basis on the remediation process, which had already started and being initiated by the bank as we announced -- as I announced in February.

And the remediation process covers also the operational and accounting framework. The actions, let me stress already initiated by the bank have been more relevant clearly by the misallocations of pre-2023 events, which have led to the equity restatement of 2024.

However, the measure is temporary and BFF Board of Directors and the Board of Statutory Auditors retained full powers and decision-making facilities. I will be -- and the Board will be cooperating fully with the commissioners for as long as they stay with us.

Now there has been different things said in the press release that we reported there. And the relevant one in the key measure is the appointment of the commissioner, but there have been other information in the press release that we have disclosed because they were communicated to us, not a final by the Bank of Italy, and they have to do mainly with the classification of past due.

Bank of Italy has identified up to and I stress up to EUR 0.8 billion additional past due related to the potential inclusion of late payment interest within the so-called contagion exposure. These were not included in the previous inspection and up to EUR 0.5 billion arising from potentially more stringent interpretation of the mechanism related to the suspension of the counting days of past due.

Again, BFF is conducting a full assessment of this amount and of these potentially more restrictive measures. Also to clarify, the impacts that I have just mentioned are not necessarily cumulative. And even in the absence of any overlap between these 2 amount of past due and taking the maximum, we would still respect the CET1 regulatory requirement. To be clear, this is the SREP requirement.

There will be probably questions, and I'll answer to the best of what I can today. There will be questions on what this means for the bank. As you know, we have received the information of this potential additional past due over the weekend, and we have already launched the full assessment of the impact. And we'll update the market as soon as possible.

Also with regards to the date of approval of the 2025 accounts. We remain fully focused on the business, on the derisking and on addressing the historical shortcomings. Today's announcement, as I've already said, largely relate to 2023 period. We continue to have 3 businesses, and we are leaders in all 3 of them.

Two of the businesses are extremely profitable, performed to our expectations and have virtually no RWA and no risk. And for the factoring, we said it in the press release very clearly, and we said it for a reason the loss given default is extremely low, if not negligible. We will continue to focus on the success of the business in the current also more complex environment and to the benefit of all stakeholders. So that was the introductory speech. I would now open to questions.

[Operator Instructions] The first question is from Tommaso Nieddu, Kepler Cheuvreux.

I have just a couple. The first one is on capital. You have said in the press release that even in the adverse scenario, you remain compliant with the CET1 requirement. But you didn't explicitly say the same for the total capital ratio, which is -- which -- I mean, which in my estimates could risk to be breached. So can you confirm whether under your current base estimates, you also remain above the 13.2% total capital requirement?

And the second question is on the ancillary credit rights reviews. And the press release refers to around EUR 452 million of payments reviewed and a EUR 3.4 million pretax negative impact statistically estimated from the EUR 102 million Sampo. Why was the specific EUR 452 million subset selected? And is there any risk the review perimeter broadens further?

On the total capital, we didn't write it for a reason. So -- but it's not -- the considerations are -- we received the communication on Saturday, and so we have to fine-tune the numbers. So we are pretty sure about the CET1. We have to assess the numbers on total capital. If you anything, it could be a few basis points.

On the perimeter, that's been determined with our external adviser. I think we mentioned the name of the adviser in the press release. So I don't see the risk that it expands further. The impact of EUR 3.4 million is by examining already effectively 25% of the portfolio on a statistical basis and the impact is EUR 2 million post tax more or less. So for us, it will not even be material. We have disclosed it to the market, and you will appreciate it in the spirit of the maximum transparency that we have wanted to give.

The next question is from Giovanni Razzoli, Deutsche Bank.

The first one is on the potential increase in the stock of past due that we have already discussed yesterday, so the EUR 0.8 billion and the EUR 0.5 billion. I was wondering -- I mean, this is potentially a temporary impact.

So I'm wondering whether in the context of the securitization that you have already announced, you are analyzing on the, let's say, old stock of contingent exposure of EUR 269 million, you could, in theory, extend this transaction to a broader scope of past due for the preliminary indication of Bank of Italy so that, that could be, let's say, a way out to free up more capital.

Is this something that is in theory a possibility? And the second question, I already asked Giuseppe this yesterday, but I would like you to see if you have additional thoughts on it. And my question relates on the potential impact on the accounting framework that the Bank of Italy is investigating, if I'm not mistaken.

It's extremely premature to take any conclusions, but can we assume or can we think -- can we anticipate a possible revision of the LPI accrual? Is this something that could have impacted by this analysis of the accounting framework?

Thank you. First of all, thank you for saying that the impact of the 0.8 and 0.4 could be temporary because the reality is that if certain objections on the classification are discussed and agreed upon, then they are discussed and agreed upon.

So as we said, these are the maximum potential, I stress the word potential impact, and we need to assess. But if we change the criteria, then we change the criteria. As you say, -- as you say, there are measures that we can take. So for sure, we could try and put LPI. We already were putting part of the LPI in the securitization we're planning to. We could put more for sure.

As always, I can't discuss financial impacts that I don't know. And I've discussed many times we do the capital creation, which could be underlying a good securitization. I don't have the impact even high level in this case. So it is possible. Clearly, there is a question of what you want to do with the LTI. I have not discussed the change in accounting of the LTI and that has not been raised to me.

Currently, if the points on the past due are confirmed, and I don't know, then there is a question of whether we do want to change that. Because if it's past due and has to go in calendar, then probably not necessarily want to do it, but we have to assess the impact. I don't have the numbers yet, but it's not a request that I have received.

The next question is from [ Ibrahim Saeed ], JPMorgan.

Just to understand, you said that the -- I guess, the review is ongoing. And could we think of the April 30 deadline for your restated accounts to be sort of a deadline for the completion of this review? Or when can we have some more clarity on the scope of the review and any subsequent adjustments? And is that the time line we should attach to seeing some clarity on the final numbers, including your CET1 and total capital and so forth?

Thank you for the question. But I forget that I don't want to go out with an annual report where there are still relevant factors of uncertainty. So that is the goal for sure.

The next question is from [ Vincent Mandoracina ] [indiscernible] Italy.

Yes. The question is very simple. You are starting to lose the access to the credit market because you -- on the credit or your first, let's say, maturity date, your credit is trading, let's say, above 7%. You're losing, let's say, 15% on AT1. So the question is, could you exclude the needs of a capital raise?

I don't agree with the assessment that we are losing access to the credit market. The AT1 is callable, and we are all rational people. And the senior are also callable, but are not expiring. You are a fine reader of our numbers, obviously. And you know because you have it in the slides that if we were to be under pressure, we collected in 2025 half of our past due. That's an easy solution. So we have many ways to create capital. We have to assess the full impact of the letter that we have received.

The next question is from Sharada Patel of Citigroup.

I have 2 questions. So I just wanted to understand, firstly, the scope for any further equity restatements, i.e., was that 2024 restatement the result of a fully exhaustive investigation alongside EY? Or could there be more to come?

And then my second question would be, obviously, in your kind of February press release, you said you're expecting EUR 70 million of provisions for the negative court rulings. But now in the latest press release pointing to the fact that this could be updated. Has there been any change in this assessment and why?

The equity restatement, listen, we were, as you know, to approve the accounts today and the equity restatement was the equity restatement before we received the communication from Bank of Italy. We have highlighted this EUR 3.4 million pretax. This also relate to things happened before 2024. And so we were not planning to include this EUR 2 million because it's not material for us. I don't know if we did this -- since we delayed by 1 month, the approval of the annual report, we want to include this amount in the equity restatement.

On the negative sentences, I don't have indication. They are not sufficient. We have 1 month to discuss with the regulator because what we wrote here is in discussion with the regulator. The policy was approved 2 months ago. We have started to receive negative sentences that we expected in 2026, which were in line with what we have budgeted. So we have no indication, but we try to be conservative in what we write also based on what we receive.

The next question is from Simonetta Chiriotti, Mediobanca.

A couple of questions from me. The first is if you expect to pay the AT1 coupon. And the second question, in the past growth in past due has been offset with changes in the accrual assumptions. Do you still see the possibility of implementing a measure of this kind at this point? And third, on the securitization, can you comment on the feasibility of the securitization, if things have changed after the last communication.

Thank you, Simonetta. On the AT1, I think the level at which the coupon is not stable is much lower than the direct by memory. And so based on what I know now, no. On the securitization, where we received this communication on Saturday. We have to understand what really will go to increase the past due given that these are potential impacts and then we may have to review the perimeter that frankly, we were already very close to finalizing. So -- but we have to assess the impact. I missed the second question, Simonetta, on the past due, if you could repeat it?

Yes. Basically, in the past, capital has been generated by changing the assumptions.

No, I don't see room to increase the LPI accrual rate. As I said, we have other venues if we want to create capital that we have to assess as we are analyzing the impact and frankly, as we're finalizing the impact on what we have received.

And it's not yet possible to comment on these different ways to create capital.

I think I hinted to it in 2025, we collected around 50%, if not 60% of our past due exposure. And that per se would correspond by half to EUR 180 million, EUR 190 million of capital that's Page 14 of the full year results presentation.

Clearly, these are extreme measures. And I have the responsibility to assess the impact on this for all the stakeholders. These are extreme measures which are there, which we can undertake if we want.

The next question is from Domenico Maggio, Jefferies.

Just one clarification coming back to something you answered before. So you clearly written that the bank continues to comply with the common equity Tier 1 regulatory requirement. But it sounded from your previous answers that you do not want to fully -- or you do not have full visibility to comment on whether you still comply with your total capital requirement? Did I understand that correctly?

And if so, why is that the case? Shouldn't be pretty simple to comment also on that? And the second question on the EUR 800 million LPI and the EUR 500 million additional exposure. What was approximately the risk weight on those 2? And where should we expect the risk weight to go for those 2 portfolio?

No. Thank you for the questions. On total capital, I tried to answer which is a few basis points different and really depends on the fine details, and I don't want to give misleading numbers to the market. So that's the only reason and it's a few basis points taking the worst case scenario where we take the full 800, the full 500 and there is overlap.

So this is about the total capital, the risk weight that past due are risk weighted at 150. Our average risk weight is already extremely high at the moment. Let me remind you that we have half of 40% of our assets invested in BTP, which are risk weighted at 0%. And we have EUR 6 billion loan book, which are risk weighted -- on which we have EUR 4.7 billion of risk-weighted assets. So it's quite punitive already. So that's my answer to you.

So shall it be maybe from 30% to 60% risk weight, 250?

No, no. The risk weight is on the past due has always been 150% -- the differential compared to the status quo for me is difficult to give as we have reported the numbers that we have received with the underlying portfolio...

And on the total...

I can't give you a number, okay?

Okay. On the total capital, when you are referring to a few bps, a few basis points of difference on what exactly? I'm not sure I follow you there.

On the total capital -- it is really a requirement. Yes, yes, requirement yes.

So basically, you're a few basis points above the requirement on total capital.

On the total above or below, that's why we didn't disclose the total capital we specified the common equity Tier 1 in the press release. But as I said, we have actions that we can take with regards to capital. We just have to manage the loan book generally.

The next question is from [ Michael Nzki, ROS ] Capital.

Yes. A couple of questions for me. First of all, I'm not sure I understand when you say that the 2 loan books, EUR 0.8 billion and EUR 0.5 billion are not necessarily cumulative. Meaning that you do not know whether there is any overlap in these 2? And if you do not know, I don't quite understand why because you know where these books are coming from. So why can't you give us a more precise answer on the potential overlap between the 0.8 and the 0.5. The second question is on the -- no, go ahead, maybe ask one by one.

I can answer this one. I said we -- the numbers we have in the press release regarding these 2 measures come from the letter that we as a Board have received from Bank of Italy. So the details of the single loan, which there can be challenges that will need to be addressed.

Of course, we communicated immediately as I think it is our duty to do to the market. We have not had the chance and it's mandate to go loan by loan. So if there is no overlap, the impact is 1.3. If there is full overlap, is 0.8 and these are potential impacts that the Board will need to assess. That's the maximum I can tell you at the moment.

Okay. And second question is, it has been touched before, but I just want to have perhaps some more color is on the potential increase in risk-weighted assets. I'm just trying to quantify this as much as possible because when I do the math, I mean, it looks to me that you were at 14% CET1 ratio.

Now we have this potential additional 1.3% at worse. But of course, the impact in terms of RWA is not going to be 1.3. It's going to be a fraction of that. Even if I make fairly aggressive assumptions on the risk weight that you put on those additional loans, you have still remained comfortably above 10% CET1 ratio, so above your 9.7% threshold. So why not give just a more precise number, whether it's 11%, 12% or 13% minimum as opposed to say that you're just going to stay above the 9.7% threshold?

I don't know what RWA assumption you are taking. We are taking the worst which is 150%, which is the level of past due. That's the level that we are taking. Yes, like I said, we are comfortably above. I have tried and I am in a difficult spot at the moment because I have always said to you, to the equity analysts that I wanted to be more conservative.

And I am on a call where many of the things that I've said over the last 2 months have proven partially wrong or not conservative. That doesn't change my approach. I still want to be conservative. So we write what -- based on information we have, we believe is true. So again, we received the information on Saturday. We have to do the full impact, which would require some days.

Yes. Okay. I understand. And my last question is, can you just clarify a question that has been asked previously, but I'm not sure I fully understood the answer is on the potential capital raise rights issue, I mean, are you willing to completely exclude them as an option?

Obviously, with the share price being down 82% year-to-date, your equity value is not worth much today, and that would be catastrophic for existing shareholders, if there were to be a capital raise at this stage of the story. So can you just confirm that this is not an option that you're considering that you're comfortable and have other options to come out of this without diluting permanently the existing shareholders?

I have much easier options. That's what I said. And also that we have to assess the impact of what we have received. We have to understand what are the implications for the various business of what we have received. But I certainly have much easier options.

The catastrophe, unfortunately, in a way, given where the share price has probably already played out to almost the full extent. But I take the point, and this is what I can tell you. I have easier options, and I have the duty to study these options.

So if a business is -- all of our business is risk weighted at 150%, maybe the easier option is to do a rolling securitization or to find a partner to buy the loan book or other things. These are all actions that we need to study that we were studying regardless of the letter that we have received.

And last time we spoke, I asked you about your shareholding and you became CEO. You hadn't been given shares in the company. Obviously, with this happening, this is a little bit worrying because if you don't own shares today, I mean, you're less sensitive to a potential drastic solution like your capital raise. Can you give us an update on where -- what's the update on your share incentive in the company as of today?

I do have share incentives. But already as the CFO, I had options. It's much higher strike. So they are not relevant. I do have in my contract, a share-based incentive. So I do not have shares, but I have the same alignment that shareholders do have.

The next question is from [ Olivier Ducan ], BNP Paribas.

I like to understand your answer about the potential payment on your AT1 coupon. Did you suggest that the coupon payment restrictions are kicking much lower than your assumed level of total capital based on your current assessment? Or did I hear -- like could you clarify this because you didn't provide a precise view on your total capital position?

Yes, it's a lower number and it is based not on consolidated accounts, but on individual accounts on top. And the perspective is...

The next question is from Simon Tornmalm, Tour Invest Partners AB.

It was in relation to the statement on the CET1 ratio for the consolidated basis because that's what I assume that the press release is referring to. Have you done any preliminary calc on the CET1 ratio for the issuer position, if that's meeting the requirements as well if in a worst-case scenario?

I have to look at -- I don't think we did, but I'm not worried at all about the individual because we always have the ability to upscale dividends from branches that we have across Europe that is [indiscernible].

The next question is a follow-up from Giovanni Razzoli, Deutsche Bank.

It can be -- or it can sound as a completely out-of- topic question, but in my view, it isn't. And this is actually on the Security Services business. Can you remind us, if you do have any beauty contest for new contracts in pipeline? Or do you have clients in the Security Services on which you have already signed a new contract, which you still need to onboard in the next few months?

And in case, if you can provide us the potential magnitude of these contracts in your Security Service business? And the second question on the Security Services business. Can you remind the audience what are the areas of business where you historically have a leading position? And what is the market share, if you have a data on those businesses?

Giovanni. I don't know if it's probably the last question, but we are getting to a close. On the Security Services business, we -- I said it publicly that we thought the current situation was not helping in getting new clients. We had a good January, and I said it on the call of the full year results that we had a good January that we onboarded a couple of relevant clients.

I was not expecting to onboard new clients in the first quarter or in the second quarter given the overall situation. In fact, I think we do have something in the pipeline. Frankly, I didn't have time this morning to verify whether these are actually going to happen or not. But I was positively surprised by the team that they onboarded -- that they were close to onboarding new clients. So that was for me a positive surprise.

On the market share, I look at my team, but really the areas are 2. We are the Italian payment service provider. So around 150 banks are intermediating payments with us. So the market share is effectively -- I don't have a number, it's extremely high. I think the top 5 banks in Italy Banks [ don't ] use us to intermediate payments.

And then on the depository bank, we are really focused on the pension fund business where we do have a leading market position. probably 40%, 50% market share in that specific subsegment. But we're also extremely strong, and that's why the concept of market share is less relevant.

We are extremely strong in dealing with small funds, alternative funds where probably larger players have less focus or less flexibility. So we have seen many of the clients and never -- actually received compliments about the level of services that we provide on that part of the business.

And a clarification on your first answer. So you added 2 new clients in January, right?

Yes. I think we -- we added some clients in January. I remember the numbers -- I gave a number to...

The next question is from Michele Baldelli, BNP Paribas.

I have a question about this, let's say, new classification of past due. Is the Bank of Italy requiring you to apply those from 2024 or they will start the classification into past due just now, just to understand the calendar provisioning impact coming from this action.

And the second point is still on this, can we share what the Bank of Italy thinks about the late payment interest in terms of classification? Are they going to be, let's say, seen as assets that will always fall if they are in past due into the calendar provisioning rule given that they are paid after many, many years, more than the 3, 4 years of the regulation?

If we -- it's a hypothesis at the moment. If we were to reclassify the past due, this would happen the first available date. So as I said, I will try to have everything on the 2025 accounts. I would see no reason to do it for previous years, given there would be a change driven by other considerations.

And we have to see, as I said, what is the actual impact, what -- where is the overlap. Let me remind you also that the inspection is not finished. So it's not -- we did not want to be in a position where we announced the number and caught everybody by is the maximum numbers if the bank and the Board fully agrees with the findings of the preliminary findings. And we have not discussed the calendar.

In 2024, the calendar was starting 2 years after the reclassification as you know. I cannot answer whether when this will start, I can give you -- I can tell you what happened in 2024, but you know very well. That's the maximum I can tell you at the moment. But we have not discussed this with the regulator. I think that was probably it for today. Thank you again for spending time with us, and we look forward to reconnecting you in the future.

Good afternoon, and welcome to BFF Banking Group Full Year 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would like to turn the conference over to Caterina Della Mora, Investor Relations; and Giuseppe Sica, General Manager. Please go ahead.

Good afternoon, everyone, and thank you for joining our earnings call for BFF full year 2025 financial results. We will start with a presentation led by our General Manager, Giuseppe Sica, followed by the Q&A.

Let me hand over now to Giuseppe Sica.

Thank you, Caterina, and thank you to our participants for joining this call. Let me start on Slide 3. Our financial results for 2025 are solid. Our adjusted net profit is up 6% year-on-year. This is underpinned by strong balance sheet, a more conservative approach and continued growth across our diversified businesses.

We also demonstrated our ability to generate capital. As we announced a week ago, we have taken decisive actions to derisk the business that will support future growth, and we will present medium targets with our new strategic plan in the second half of the year.

Moving now to the key financial metrics on Slide 4. Let's look at the wider context. We are a bank with a solid level of profitability with adjusted ROE at around 23%. Even on an unadjusted basis, ROE still reached 11% despite the impact of the derisking actions. I already mentioned adjusted net profit being up 6% and our deposits in transaction services have grown 15% year-on-year.

Our loan-to-deposit ratio is at 75%. We generated over 300 basis points of capital in the year. This allowed us to derisk the balance sheet while maintaining profitability. And finally, our common equity Tier 1 reached 14.1%, well above our 13% internal target and above the targets we communicated 1 week ago.

Let me touch here briefly on the dividend. Our dividend policy remains unchanged and targets a semiannual distribution of the adjusted net income generated in the period and in excess of 13%. Today, the Board of Directors have made the decision not to propose a 2025 dividend to the AGM, and this is in order to solidify our derisking actions.

Let me go back to business and P&L on Slide 5. As I've already mentioned, adjusted net income was up year-on-year, thanks to both factoring and lending and the transaction services business, which both contribute positively to growth. Net revenues were up 1%. On the cost side, OpEx was up 2%, and we continue to invest in key areas to support long-term growth and value creation.

Profit before tax for factoring and lending was up 1% despite what we have discussed in other calls, the impact of reschedulings. In our transaction service business, PBT has grown to around EUR 50 million. I will provide more granular detail later on. But let me highlight the profitability of this division would be significantly higher if they just invested their liquidity in BTPs.

Let's look at the factoring and lending results on Slide 6. Net revenues are up slightly, and they are supported by the improved gross yield spread versus the ECB MRO rate, which drives our funding costs. And this is despite the impact of rescheduling, which we announced last week. Let me remind you that, thanks to the increase of the LPI collection days announced last week, the reschedulings are also expected to go down going forward. Finally, off-balance sheet funds remain an important source of value creation in the medium term, especially as we accelerate and will accelerate collections.

Let me give you now some KPIs on our factoring and lending business on Slide 7. Volumes in factoring and lending are up year-on-year. Loan book was almost flat. This is thanks to collections. We have a geographically diversified business and saw strong growth in several markets. In Italy, our volumes increased 5%, while the loan book saw an improvement in collections at year-end.

France saw the loan book grow at 135%, while volumes increased by 155%, thus already surpassing Greece and demonstrating the significant growth potential of this strategically important market. We estimate that the addressable market in France is double the size of Italy, meaning there is a lot of untapped growth for us to go after.

Moving to Slide 8 on payments. Deposits showed a good performance and are up 4% year-on-year. To provide some additional context, let me remind you that deposits from payments are remunerated at Euribor or below. If the payment division invested in variable Italian government bonds, PBT would have been around EUR 70 million. 80% higher than what we reported of EUR 40 million.

Moving to Security Services. This recorded a very strong growth in liquidity, thanks to an increase in depository bank assets and global custody assets. We had a strong start of the year in 2026, where we added 2 significant and large clients for us. Similar to what I mentioned on the previous slide, deposits from security services are remunerated at our internal transfer price of Euribor. If the division invested in variable government bonds, Italian government bonds, PBT would have been nearly 4x larger than reported at around EUR 50 million.

BFF on the next slide, continues to invest in initiatives to support long-term value creation across our whole business. This resulted in a 2% year-on-year increase in costs. The additional investment was focused on improving collections and improving digital technology for digital euro in the transaction service business units, Costs are also partly up due to inflation in Poland. We still maintained our cost/income ratio at 48%.

Let's look at our balance sheet on Slide 12. Loans were flat year-on-year due to improved collections. We achieved strong growth in transaction services deposits, up 15% versus 2024. This allowed us to reduce significantly online deposits while maintaining a healthy loan-to-deposit ratio of 75%. Please note also that in other assets, we have around EUR 600 million of reverse repos. So the net balance of repos is much lower than shown on the slide. As a final point, let me highlight that equity increased by more than EUR 150 million since 2023 reclassification to more than EUR 100 million, and this includes the negative effect of the derisking.

The next slide this is a new slide. Just 2 points for you. We have around EUR 100 million of unrealized gain on the variable bond portfolio. As we have done in the last 5 years, we can manage this gain over time. And this EUR 100 million is much higher than it was in the past. Number two, we have around EUR 1 billion in fixed bonds, yielding around 0.6% and expiring largely by 2027. This will provide a clear tailwind in the years to come.

Turning to Slide 13. BFF is fully focused on maintaining a low risk profile. Total NPLs, which mainly relate to conservatorships are stable or decreasing at around EUR 100 million and are largely under European Court of Human Rights, confirming the liability of the Italian state. UTPs are down, thanks to our collections and agreements in Poland. Total impaired loans would be down by more than EUR 300 million year-on-year if we included the effect of the cure period of close to EUR 200 million, largely driven by actions which we undertook in the fourth quarter.

I would also remind again that our NPL exposure is almost entirely towards public administration. You are familiar with the derisking actions we took 1 week ago, but let me provide some additional color on the next slide. We analyze the perimeter of Italian negative court ruling. This is equal to around 5% of the group loan book and 98% of these are under appeal. As you know, we also have the right to return invoices to clients. The rulings mostly relate to legal claims, which have followed the ordinary legal action procedure. We have already returned, as you know, to the use of injunctions, which we expect to speed up resolution times. It is important to note that these provisions are a reflection of a possible lower profitability on this portfolio, not to create risk, possible lower profitability, mainly due to 2 factors: one, the differential between LPI rate and the retrocession rate to clients; and two, the longer average length for completion of claims following Italian ordinary legal actions compared to injunctions, which we started again in 2024.

The approach to provision is based on a ruling-by-ruling analysis and does not take into account out-of-court transactions or positive rulings. We expect that the court rulings on ordinary legal actions will come to a conclusion in '26 and partly '27, which is reflected also in our projections for 2026. Finally, as I mentioned last week, BFF has EUR 53 million in off-balance sheet revenues related to final positive court rulings, which continue to generate LPI for euro and anatocism. And we have a lot of sentences in positive ruling not yet final.

Moving to our past due exposure on Slide 15. Past due would have more than halved since December 2024, excluding the net new volumes and the new debtors in past due. Going forward, past due reduction will be supported by cure period, the potential securitization and the derisking actions. In particular, let me remind you the potential securitization, as I said on last call, is not included in our estimates.

Moving to capital ratios on Slide 16. On an organic basis, BFF generated more than 300 basis points of capital year-on-year before the one-offs. Even after taking into account the one-offs, our capital position remains strong at 14.1%, above our internal target of 13% and well, well above the SREP. We also continued to reduce, as we said, RWAs and RWAs density, and we have more opportunities to do so in the future. Let me give you just one example. Our EUR 180 million in cure period will also result in a reduction of more than EUR 200 million in risk-weighted assets, probably closer to EUR 250 million.

Now a quick summary on the next slide of this set of results before we move to Q&A. In 2025, BFF achieved solid level of profitability with an adjusted ROE of around 23%, and we demonstrated our ability to generate capital while taking significant actions to support future, for the next few years, growth.

Thank you for your attention. I will now open to Q&A.

The first question comes from Tommaso Nieddu from Kepler Cheuvreux.

The first one is on the provisions. So that would be very helpful to have a bit more color on your provisions in the current assumptions for 2026. So to help us to understand how the new policy in the provisioning translates into the numbers. The second one is on the dividends for 2025. At the end, the CET1 ratio was at 14.1%, so above the range you gave just 1 week ago. So if you can help us understand why 0 dividend for 2025 is the optimal choice? And the third one, a very quick one. I'm just trying to understand if the longer collection assumption for the late payment interest should mechanically depress earnings from 2026 onwards.

Thank you, Tommaso. I will try to answer your questions to the best of what I can say. So provisions, the EUR 72 million was a one-off and was the result of several years of ordinary legal actions that they started in 2020, '21, '22, '23, so it was several years. So the number for 2026 will be a fraction of that. We don't give a number, but you can build a reasonable estimate based on what I said. And this estimate is already included in EUR 160 million that we gave for 2026.

As I said, for me, what is more important is that these ordinary legal actions will die off after 2027 based on the timing of Italian court rulings. So we will still have some headwinds in 2026, not much on 2027, and then we should be in a more normalized and positive environment.

On the dividend, as I said, dividend policy remains unchanged. We have announced certain actions. We have announced that there are potential other actions. And I, as the new General Manager, want to solidify these actions. I remain committed, and that's why I said it in introduction to the dividend policy of the bank. Was this the best decision from the Board? The market will judge. I look at the market in the long term. I don't look at the market tomorrow. So that would be my answer to this point.

But I think we have shown that we can create a lot of capital, and that's why I also pushed to take a certain approach on the rulings. On the lengthening of the days, I think there are 2 effects, which more or less offset each other. So on the one hand, you have a lower discount in time for LPIs. On the other hand, you have less rescheduling. So the 2 will more or less even out.

The next question is from Manuela Meroni of Intesa Sanpaolo.

The first one is on the common equity Tier 1. At the end, you end up with a 14.1% of common equity Tier 1. You guided for 13.2%, 13.5% just 1 week ago. So I'm wondering -- I would like to understand what has generated this change between last week and today.

The second question is on the securitization that you are working on. Could you please share with us what is the size of the securitized portfolio? What is the timing that you expect to have? And what will be the recurrent impact on your profitability?

The third question is on the calendar provisioning. I would like to know if you can share with us what is the impact of the calendar provisioning that you are assuming in 2026 and 2027. Another question on the portfolio on the negative court rolling portfolio. I'm wondering if it is exactly the same of the contaging portfolio. And finally, I would like to a confirmation about the fact that you are going to pay the coupon on the additional Tier 1.

Thank you. On the common equity Tier 1, as I said in various calls, I prefer over-deliver. So there was a buffer in my best estimate. And frankly, I think we were very efficient in the way we manage our balance sheet at year-end. So that was a positive surprise, and I hope is the first of many.

The securitization, as I said, we have been working on it. The actions that we undertook 1 week ago were also a result of that work. It's a bit too early to give you now the portfolio. I think, obviously, if we do it, it's going to be positive for the bank. Otherwise, by definition, we will not do it, okay. And it's not in the estimates that we have provided to the market.

I think you have seen the impact, for instance, of the cure period in terms of capital creation. And this cost a few basis points in terms of cost of risk in 2025. So we have huge levers to reduce the RWA once we do a securitization. It's not in our estimate.

On the calendar provisioning, I can give you the number for 2025, which is not negligible. So we have already taken some impact in the course of 2025 and stands at around EUR 50 million. We are going to change the disclosure on this, but obviously, I can't give too much detail on this call. What I can say is that in our estimates, the risk of calendar is only manageable with internal actions without taking into account the securitization. We have reduced it. If you look at the contagion portfolio, we have been continuing to reduce it. We have actions, managerial actions in mind to put in place in the first half of the year.

Related to this, I think there was a question on negative rulings and overlap with the contagion portfolio. By memory, it should be around 50% overlap. So what we did there will have an impact also on the calendar. And frankly, possibly on the securitization because as you can imagine, the focus will be for the securitization to address the contagion portfolio. We have no reason to get rid of invoices, which are past due, but we collect in 2 months. As we have shown, we have collected already 50% of the past due that we have at the beginning of 2025. So that's how the rotation of our portfolio is.

On the AT1, I'm surprised that you asked the question. I think we already paid the coupon in January. We have a buffer of probably 4 or 5 percentage points on our SREP. So we have plenty of capital to pay any coupon that may be needed. And as I said, it was not an easy decision but the division is supposed to not to pay dividend now. So for sure, we need to pay in January the coupon on AT1. We will continue to pay the coupon for the foreseeable future.

Next question comes from Davide Giuliano of Equita.

I have some. The first one is on the business outlook. I know it's only been a week, so perhaps it's still too early. Have you noticed any concern or impact from your customers regarding recent events, particularly with regard to factoring business and the custodian bank customers?

The second one on the rulings. Can you give us an idea of the credits that are still in legal dispute in the first instance of the judgment not yet receiving either a positive or negative outcome? And do you see a risk on this credit going forward?

The third one on the contaging portfolio. Can we assume that the decline in contaging exposure from EUR 296 million in Q3 to EUR 269 million this quarter is entirely attributable to the adjustments made? Or have you recovered something? Can you give us some details on the moving parts?

And the last one regarding CET1, looking at capital in absolute terms, can you provide us with the moving parts that occurred during the quarter? Because at first glance, it would appear that there was a negative impact of approximately EUR 20 million that I cannot reconcile. Is it related to calendar provisioning you were referring before?

Okay. Thank you for your questions. On the business outlook and related to the reaction of the recent announcement, frankly, we have had negative surprises when Bank of Italy imposed a dividend ban. What we did last week was a surprise. The market reacted in a certain way. So I already thought was a negative surprise, but these were actions that we undertook thinking about the next years of the company. So I would be surprised if apart from rumor on the press, any of our clients would have had any negative reaction.

Our factoring and lending clients need us, do business for them. In the custody business, I've had a couple of calls with some of our 300 of counterparts to explain the situation. I have not seen any negative sign. So nothing really related to what was announced. The business outlook for the year in general is the one that we gave last week with our new target of net income. And as I said, I hope that the surprise on the common equity Tier 1 is something that can be repeated in the future.

Yes, on capital, you are right. The difference we probably cannot reconcile was around EUR 20 million of calendar provisioning, probably was a bit less that we had in the quarter, but that's what you were unable to reconcile. And we -- of course, in our estimates for the provision, we take into account of whatever is not included in the judgment. Our estimates for 2026 already include the impact of what is not under negative court ruling, but that may go under negative court ruling. Of course, it's an estimate because if we knew it was going to negative, then we will take the provision this year, but it's definitely in our number. I hope that answers all your questions.

Just a follow-up, sorry -- just a follow-up on the contingent portfolio. Is the reduction entirely attributable to the provision you have made? Or have you recovered something during the quarter? Just to understand the evolution of portfolio.

No, we have recovered. We have recovered. So that's not going to -- it's a mix of the -- probably the collection was higher than the impact of the provisions.

The next question is from Simonetta Chiriotti of Mediobanca.

The first question is on volumes. There is a drop in the last quarter, which is around 13%, excluding Polska. Could you elaborate a bit on this? So what happened in the quarter on the commercial side? And what are the assumptions on volumes and loan growth in the guidance for 2026? And another question on the provision that you made on that portfolio. Do you always have the right to retrofit the asset to the seller no matter what, I mean, in any case?

Thank you for the question, Simonetta. On the volumes, I think fourth quarter was underwhelming. So we accept that we have incorporated this trend in the estimates for 2026. We did not provide the detail of volumes for 2026. But as we wrote in the last week's press release, that's one of the key reasons we have revised the budget. The announcements that we made last week also took a lot of management time. That's not an excuse, and we know that we have to do more or we can do more. And our budget, frankly, is not in terms of net income is not overly ambitious.

The second question, the put back the receivables, yes, we always have the right to put back the receivables. So the right is there, and it's very clear. The credit that we buy, they have to be certain, liquid and collectible. That's what we have in every single contract with our client. I'm not aware of any exception, but that's the -- these are the 3 key words that were our contracts if they cannot be collected because there is a negative court ruling, they can be put back to clients.

Now why did we take the provision so that we are clear, we took the provisions because there can be a different interest rate between LPI rate and retrocession rate. This impact is exacerbated by the fact that the ordinary legal actions take a long time. There may be residual risks, for instance, in cases where our client has gone bankrupt. But as you know, we work with large multinationals. So when I think about my cost of risk, let me remind our counterpart is the state, if you look at the underlying cost of risk, our counterpart is the state hence, we have recourse to our clients. So when we compare our cost of risk to that of our commercial bank, the credit risk should take into account these 2 factors. I have described it as a possible lower profitability, which I think is the right description for the provisions that we took.

The next question is from Michele Baldelli of BNP Paribas.

I have a few questions. The first one relates to the, let's say, negative court ruling, let's say, because in the last reporting, you adjusted for those, and therefore, the adjusted net profit for '25 was not impacted by this EUR 72 million lower. So I was wondering on this net profit target 2026, shall we apply the same reasoning that you will not include in the adjusted net profit, this negative court ruling?

The second question relates to the -- let's say, to the 54% that you disclosed of the past due that were collected in the last year. Can you give us an idea since the start of the investigation of the Bank of Italy, what could be the same percentage and therefore, how much it is still present in the balance sheet in the, let's say, total past due since the start of the investigation?

And finally, the other point was more on the, let's say, nominal credits, the EUR 400 million that you have on the negative on total nominal. How much are, let's say, related to the contingent portfolio and how much is outside? Just to understand if there is anything in the past due. And in case, if some of those of this EUR 400 million are also outside of the past due, if you can give some visibility, please?

So the portfolio -- I'll start with the last question. The portfolio of EUR 400 million, by the way this is the gross book value, the net book value is lower because, as you know, we accrue for only around 65% and probably lower percent of all the accessories has some overlap with the contaging portfolio. I think I said it's around 50%. So that will have an impact.

There may be and there certainly is something which is not in past due. It's a small number. I don't have here the number of what we collect since Bank of Italy investigation. However, I can give you a sense in terms of capital and invoices we collected of things that we bought in 2023, we collected around 90%, 95% of those invoices. So that's a healthy number. So our front book rotates very quickly.

On the court rulings, we treated the one-off this year as a one-off because it was a conservative change in provisioning policy. So -- which was the result of the backlog of several years. For next year, it won't be a one-off. It will be in our numbers and is in our numbers. And I answered before one of the calls asking what is the number. We don't give the number, but EUR 72 million is the result of several years, you can form a view of what the number can be. What is not in our number is the impact of the positive ruling, okay? So not only we are not accounting for them today, but also we have not included them in our budget.

Okay. Just a last one, curiosity. The assets of the Ecobonus until when you can, let's say, use them, collect them and how much of those you can sell?

We have really 2 parts of the business model to this. We have very clear portfolio, which we buy and sell, but we only buy once we are certain that we can sell. And then we have another part which we -- on which we have collection curves that go down another couple of years. That's the best estimate I can give you now.

But it's basically 5 years, if I remember well, the legislation. Do you agree?

Around 5 years, yes. We have another couple of years left.

The next question is a follow-up from Simonetta Chiriotti of Mediobanca.

So my question is on future provisions. What happens if you have a negative ruling in second degree? Should we expect further provisions? And second, assuming that you have now a more conservative approach, do you -- can you help us to understand if there are other areas where you could start provisioning? So for example, if you receive an opposition to an injunction or considering the collection process in general, can you help us to understand if there are steps that could trigger further provisions?

Thank you for the questions, Simonetta, very detailed. So on future provisions, most of the provisions are related to first order ruling also because we assume that we are unable to turn around the vast majority of them. So if there is an effect, it's a second order effect.

On the injunctions, as you know, it's a very quick process. which explains why I'm much more positive on the effect of this post 2027 action. It's a very quick process. We know what is missing -- if we were to lose, we would know immediately after 3 months what is missing. If the client give us what we need, we can go under appeal. Otherwise, we put back the receivables. That's the way we are going to run the business.

Mr. Sica, there are no more questions registered at this time. So this concludes our question-and-answer session. I would like to turn the conference back over to Giuseppe Sica for any closing remarks.

I would like to thank all the participants, and I look forward to speaking to you again when we present our first quarter results. Thank you very much, and have a great rest of the week.

Good afternoon, and welcome to BFF Banking Group Market Update Call. [Operator Instructions] Please note this event is being recorded. I would like to turn the conference over to Caterina Della Mora, Investor Relator; and Giuseppe Sica, General Manager. Please go ahead.

Good afternoon, and thank you for joining this call, and good morning to our participants joining from the U.S. To start the call, our newly appointed General Manager, Giuseppe Sica, will deliver a short overview on today's press releases. We will then open the call for Q&A. As a reminder, we will publish our full financial results for 2025 on the 10th of February with the usual presentation and Q&A format. Giuseppe, the floor is yours.

Thank you, Caterina. And thank you, everybody, for joining. BFF made 2 significant announcements this morning. First, Max, who led BFF for 12 years through its transformation to listed International Financial Group is stepping down from his role as CEO. She will continue to support the company in her position on the Board of Directors as a nonexecutive member.

Our Board of Directors has appointed me as General Manager of BFF and entrusted me with full powers previously held by Max. My working relationship with BFF started in 2013 as an adviser. I supported the group through its biggest transformational moments, including the IPO in 2017. I am proud to take this opportunity. Moving to our second announcement. BFF is taking decisive, proactive actions to de-risk the factoring portfolio and make sure that the future profitability is more predictable.

Let me start by providing some context. As part of the 2026 budget process, the development of the new strategic plan we are starting to work on and ahead of a potential securitization, we made the decision to conduct an internal review of the factoring portfolio. Based on this in-depth review, we have taken actions resulting in the planned restatement of 2024 accounts and have an impact on 2025 year-end figures and on 2026 financial targets. As Caterina said, we will present our full financial results for 2025 on the 10th of February, but let me give you some context. The one-off negative impact of the actions is expected to be around EUR 95 million, accompanied by reduction of our nonperforming exposure.

It is also important to note that we have EUR 53 million in off-balance sheet revenues not included in our P&L and to final positive court rulings on credit exposure to the public sector, and this will come through over time. Moving now to the detail of the actions. First, we have reviewed the entire portfolio of negative court rulings related to Italian public sector receivables. We have taken a conservative one-off provision of EUR 72.2 million. 98% of these provisions relate to court rulings still under appeal and BFF mandates the right to return the claims receivables to clients.

Second, due to a slowdown in collections for the 2023-2025 period for cases that follow the procedure for ordinary legal actions, we have prudently increased the expected collection time of late payment interest from 2,100 to 2,400 days. While this is expected to result in one-off impact of EUR 22.4 million for 2025, the full enforcement of injunctions expect to reduce collection time going forward. Finally, the review identified operational errors on about EUR 54 million of cash allocation in factoring before -- from before 2023.

This is equal to less than 0.2% of cash collections over this period. To correct this, we are restating the 2024 account and expect bank equity for the year to be around EUR 14 million lower than previously stated. Now let me summarize what these decisive de-risking actions mean for our results for 2025. The adjusted profit is estimated at around EUR 150 million, up 5% year-on-year and resulting in ROE of around 23%, demonstrating our continued profitability.

The reported net income is expected to reach around EUR 70 million. Including the effect of the actions taken and before any dividend, the CET1 of the bank is estimated to be between 13.2% and 13.7% above the internal 13% target. Of course, the underlying capital generation is much stronger before the actions we decided to take.

On the basis of loan growth and collection performance of 2025, BFF has also approved a more conservative budget and revised its 2026 financial targets, which are for the year adjusted net income of around EUR 160 million, earnings per share of around EUR 0.8, cost income lower than 50%.

The return on tangible equity is expected to be around 24%. BFF remains a structurally solid and profitable business. We have taken certain decisions, and we expect to continue to deliver earnings growth and strong capital generation. The one-off actions announced today [ plus off ] historical issues and will improve the predictability of our future profitability.

Thank you, everyone, for your attention, and let me open now the call for Q&A.

[Operator Instructions] The first question is from Giovanni Razzoli of Deutsche Bank.

I have a number of questions. The first one is on the time line of these extraordinary de-risking actions. In my view, it's clear that the market struggles to understand why you have decided to take these provisions now and not 6 or 12 months ago because, I mean, most of them come from the fact that you had a negative court rulings, which I think you were aware of in the last few months.

So first one, why decided to do so and not anticipate this decision a couple of months earlier? And then whether this decision has impact on the time line of the securitization on contaging exposures which is, in my view, important to avoid that the calendar provision kicks off in September. So I'm wondering why you continue to speak about a potential securitization and what are in case the contingency plan in case, for example, you were not able to perform this securitization to avoid this major impact of the calendar provisions?

Second question, the EUR 72 million of provisions, can you tell us what is the perimeter of receivables that was impacted by this provision because you covered all the Italian business, but what is the amount of provisions that was referring to -- the amount of receivables that were impacted by these negative court rulings? Second -- another question is on the EUR 54 million of errors in cash collections or allocation of cash collection. This is also very surprising because cash is cash, and we struggle to understand how you can do an error in the cash collection. I understand it's a very limited percentage of your portfolio, but is a major surprise.

So why this EUR 45 million of error resulted into an only EUR 14 million of restatement? And the last question, sorry, it's a number of questions, but this is the last one. Last year, this period, you announced the EUR 240 million of net income target for 2026. Now you are revising the guidance to EUR 160 million.

Can you tell us what are -- in very, very simple and general terms, what are the different assumptions to this huge revision of the guidance? Because my perception is that with this press release, we learned that the business model of BFF is not as a free risk as we thought and the profitability is not as high as we anticipated. So you can elaborate also on this.

Thank you, Giovanni, the questions are hopefully clear and if I miss some points, of course, let me know. On the time line, could you announce this 2 months earlier? The answer is no. We have finished the analysis in the context of the preparation of the budget. And as I said, in the context of the work we are doing on the securitization. And obviously, I agree with you that the securitization is an important upside in our business. We discussed the numbers and it can free up a lot of capital.

The securitization is not even embedded in our internal projections on capital generation. So we don't need the securitization. We are working on the securitization. And as you've seen, we have now announced also JPMorgan and PwC who have experience in similar transaction to move as quickly as possible. Do we have a better plan for the securitization? As I said, it's not in our numbers, in our internal numbers. We don't need that, but we can do other things, which are also not in our numbers.

For instance, you know that there are insurance policies that can guarantee the loans and then extend the calendar provisioning. So we have very clear in our mind the issue. We don't need the securitization. We want to do better than what we have in our numbers. That's the underlying reason for taking -- moving to the EUR 72 million provisions, the provisions we are taking.

We analyze the entire factoring loan portfolio. So this covers all of it. If you ask me what is the perimeter of the negative sentences, it's around EUR 400 million that we have analyzed. And it's a concept that is provisioned, which I in taking upon this role also wish to have high enough to be sure that I give positive surprises, not negative surprises to the market. So that's the reason and the perimeter for the number.

Cash collection, I understand the question. Cash is cash. We do not provide mortgages. We negotiate and transact with customers. And we have some freedom according to the civil code to allocate differently between capital and that payment interest. There were a few isolated cases in which the allocation was done differently to internal procedures, still according to law. Let me stress that all of this, and we have reviewed all the years between 2015 and 2025, all of the cases that we have identified are pre-June 2023. And it's related to internal procedures, okay.

So we are not receiving the payment for the mortgage interest rate. We are receiving cash for transactions we need to allocate, and we have, in many cases, freedom to allocate. So I share the fact that this is a surprise. It's limited result, and there is not much more to say about it, I do think. By the way, as you see, the impact is very limited compared to our numbers. And then with regards to the question about the 2026 number. And I think it's important to stress that even with that number, we have a very high ROE.

Even with the actions that we have taken, we probably generated 4 percentage points of common equity tier 1 in the year in 2025 write-off. And I'm here to deliver on those numbers or better. This is a short-term target because we have to work on the new strategic plan to make more. Now we are focused on cleaning up the book to start the new for the years to come. So I hope, Giovanni, I've answered all of your questions. But if you have any follow-up, happy to take it now.

Yes. So just a clarification, you said that EUR 72 million of provision applied to EUR 400 million of receivables, right?

Yes. We have analyzed to be clear, all the entire perimeter, okay, but they refer to the -- around EUR 400 medium -- I am sorry, let --if you don't mind I'll integrate. As you can see, it is a high number given the perimeter, given that these are not final sentences, okay. So my approach, the Board's approach has been one to be conservative on this.

The next question is from Simonetta Chiriotti of Mediobanca.

My first question is on the governance changes announced today, which include the appointment of a General Manager. So could you clarify whether the appointment of a new CEO is planned? And alternatively, is this governance structure intended to remain in place over the long term? Or should we expect further strengthening in the management team? Second question, back to the EUR 72 million provisions. Please, could you clarify a bit more?

So EUR 72 million provision means that all the assets where you had a negative court ruling in the first instance have been provisioned 100%? And what is the EUR 400 million that you were mentioning before? And second, is this a change in the provisioning policy? So should we expect more volatility in the cost of risk going forward because you apply these provisions every time there is a negative court ruling, how often this happens? Could you please help us understand better this matter? And finally, could you also elaborate on the funding side of the business, especially on short-term funding, do you see any risk on this side?

Thank you for the question. I'll start with the numbers one. They are easier for me. So the provision of EUR 72 million referred as I said to around EUR 400 million of the portfolio. And so we are not provisioning 100%. We are taking a very conservative provision because as you remember from many meetings in the past, we always can put back the receivables to the original client.

And so what this provision covers for is the difference in the interest rate between LPI and the retrocession interest rate and in the risk, which we believe is very low given that we work largely with multinational company that when we retrocede the multinational company does not pay us. So this is what the EUR 72 million covers.

Yes, we will take provisions in the years to come because we have decided to apply more conservative provisioning policy, this negative sentence. And the EUR 160 million for 2026 already includes our best estimate of the provisions. I don't think, however, that this creates more volatility. And the reason is that we have good visibility on the timing of these negative sentences. So I don't think there is volatility. We expect the phenomenon of the negative sentences to die over the next year to 1.5 years. These are mainly related to ordinary legal actions.

So as we are moving back, and it always takes a bit of time, and I appreciate the patience to injunctions -- to well done injunctions, then we should see this phenomenon to die out. So I don't think it creates more volatility. We are taking a conservative approach here because we -- as it is written in the press release and as I think we have mentioned, we have taken the negative impact of nonfinal sentences, but we are not taking the impact of final positive sentences. We have EUR 53 million of P&L impact from final positive sentences that are just there to be collected.

Now it may take 1 year, 2 years, 3 years, whatever the time for receiving the money from the public administrationist but these sentences continue to generate LPI. So the later we collect, more we collect. So this is the policy, which I think is conservative enough at the moment. On the funding side, I joked in the past that compared to a normal commercial bank, we are one of the few where the duration of the liabilities is probably longer than the duration of the assets. So we don't see any particular phenomenon there. We have fixed-term deposits, which cannot be withdrawn.

We have deposits from the transaction services, which cannot be moved unless you change depository bank, which doesn't take 6 months, it takes much longer. And in case of any need, we can always stop buying, not that we have any need at the moment. On the governance, what I can tell you that I have the full power and the full confidence of the Board. We have started to work on the new strategic plan as a management team, and we as a management team will present it going forward. Will you see changes in management? I hope, yes. I hope in the very short term because we need a new CFO.

The next question is from Tommaso Nieddu of Kepler Cheuvreux.

I have a few ones. The first one is on the EUR 22.4 million one-off in which you extended the LPI collection time. So my question is, is the slowdown broad-based or still concentrated in certain debtor types or region course or it's part of this EUR 400 million portfolio you were talking about before?

The second question is on the CET1 ratio that you are guiding between 13.2% and 13.7% before dividends. And so if you can help us understand a bit or how do you think about payout for 2025? And last one on the revised 2026 guidance. So I'm trying to understand this deceleration on volumes growth. And I'm trying to understand if that is linked with what we see from market data like average payment time from public administration, which seems to be faster. And then -- but from what you say, the collection of LPI is lower. So can you help us understand a bit also the trends there? And you talked already about the revised 2026 guidance, but trying to understand a bit more about the weaker outlook on volume growth.

On the EUR 22.4 million, I'd say it's generally broad-based. And the reason for that is the ordinary legal actions, which just means it takes longer to collect. As you know, in 2024, we started to go back to injunctions. It's a gradual process. So that's why I said we see this phenomenon of the negative sentences to go down in '27 or beginning of '28, okay. But it's broad-based and I think it's temporary.

On the guidance for 2026, we still see a good volume growth in many geographies, and this includes Italy. We see France as a market where we will grow significantly. I won't anticipate the numbers for 2025, but we see a lot of potential there. I think we have included in the new numbers some provisions for negative legal sentences. We have a bit of buffer for other phenomenon. As I said, we want to do better, not worse than this number. Just one second. On the common equity tier 1 ratio, we will see what is the exact numbers after we have fully closed the account. The dividend policy remains unchanged. The Board needs to decide what to propose in the context of the full year results.

The next question is from Davide Giuliano of Equita.

I have 3. The first one, if you can provide us some -- let's say, some light on the reasons why the PA is contesting these impaired credits? And do you see the risk of happening it again in the future? Referring to the negative judgments that you faced in the past months? The second one is regarding the consolidation of the contaging portfolio. How much NII do you expect to lose when the consolidation is fully implemented, so the run rate impact?

And what impact on the income statement can we expect in the event of either disposal or securitization? Because I think the further time passes, the more there is a risk that the calendar provisioning will come in September. And of course, then you have to leave on the table in case of sales or greater fees are charged by the intermediary for the securitization and therefore, the impact will be more, more impactful. So can you give us some expected impact on the security -- on the consolidation of the contaging portfolio, either if it's a disposal or securitization?

And the third one, regarding the new definition of default and in general to the business model, also looking at the choices your competitors have made in the past. Do you think that in the long run, BFF business model may gradually converge towards a traditional factoring business model with dilution of profitability compared to the LPI-related business?

Thank you. Thank you for the question. Very, very clear. I'd say the phenomenon of negatively legal sentences is really related to this ordinary process that we have undertaken in previous years. It means that the level of detail that we had to provide to court was much higher than we used to do in the past, and we probably were not ready to do that. And so if you don't provide the full documentation, sometimes you get no as an answer, even if you bought invoices, even if the service was rendered, I think you always can put back the receivables.

And in terms of contaging portfolio securitization, I cannot give you a number. But the message is that once we do it, we think there will be a positive -- potentially significantly positive capital impact given the contagion effect. And so what we are doing is we are trying to select and I apologize then if the term is not clear to all the list and to more contagion invoices so that if we remove the contaging portfolio, we have a significantly high reduction in the past due.

On the new go, let's see what comes out. I don't think that the underlying business model of the bank changes as a result. I see the question about are we going to become a more normal bank. We have very public M&A criteria, which see the value in the long term of diversification. It's not something that we are doing tomorrow, but we continue to monitor the market if there are opportunities to do that. By the way, it's important for me to stress in this call that, yes, the factoring and lending is a very profitable business, but so is our Transaction Services business, where the numbers that you see on our presentation are impacted by the drops of price, the PBT would be much higher than what you see there.

The next question is from Manuela Meroni of Intesa Sanpaolo.

I have some questions. The first one is a clarification on the common equity tier 1. You provide a range of 50 basis point difference between the 2 levels. So I'm wondering what can change by 50 basis points to your common equity tier 1 when you have already announced your stated and adjusted net income?

The second question is on your 2026 targets. In terms of bottom line, you are guiding to a 6%, 7% increase, but 2025 has been penalized by still a fewer injunction compared with the ordinary legal action. There were a lot of rescheduling, probably some cost and so I would like to understand what are the moving parts between 2025 and 2026 in terms of volumes and revenues and cost?

And the last question was on the provision that you have done on the LPI collection time. I was surprised that it has been extended, considering that you are moving from ordinary legal action to injunction that should provide a faster recovery. So should we expect, this -- let's say, this extension in the collection time to be limited to 2025 and will be recovered afterwards? Or we should expect this to remain stable for a while?

Thank you, Manuela. The questions are clear. On the range, I'd say we have not announced the full results. So we prefer at this stage to keep the range. Have we been too wide in the range? Probably yes, but in fact we prefer to be that way than the other way around. We don't like to get this wrong. On the LPI collection, I start from this one. Our collection times are based on long-term historical averages. So the effect of the ordinary legal actions and frankly, of the negative sentences effect now. And we do not feel yet in these long-term averages the benefit of the injunctions.

That's why we write that we expect a decrease of the LPI collection time going forward, of course, it's going to be a gradual process. You remember that the bank already revised its collection times a few years ago from 1,800 to 2,100. Now it's the time to reverse the trend. On 2026 numbers, the 2025 has been a difficult year and the fourth quarter, as you can now understand, has seen some in-depth reviews and attention from the management, which has slowed down some areas. In 2026, there is the impact of negative sentences, which we would take as a provision. We have an estimate. We don't make it public. So that's a tailwind to 2026 results. We expect lower scheduling also because we have increased the expected collection times. As I said, we try to be conservative in this estimate.

The next question is from [ Ibrahim Saeed ] of JPMorgan.

Apologies if this was asked already. But just to understand, obviously, management changes and the provision. But to what extent this has all been, let's say, discussed and approved by the regulator? And when I say approved by the regulator, like is there a level of comfort in the quantum of provisions you have taken? And was there any intervention on their part or additional intervention, let's say, leading up to these events?

Thank you, [ Ibrahim ]. I think we know that the regulator needs to approve management changes. The Board approved it, and I have my fit and proper assessment when I became CFO 12 months ago. On the level of provisioning, this has been a decision of the bank. As I took upon this role, I -- it was important for me and for the bank to be sure that we are taking the right level of provisions. We have a few things to do in the next few months, and this hopefully will give us the right cushion to take these actions.

Okay. And just on your ROE targets, would you say that in the projections you've given yourself some, let's say, some space to maneuver if you kind of slide on some of those targets or time lines as in how confident are you on those ROE targets?

As I said, I think we have taken a more conservative approach, which includes what we have seen in terms of collection times and volume in the last couple of quarters. So we have tried to give a very fair representation of where we see the business going forward that can do better. We have many things to do, which -- to do better on -- from the commercial side.

Understood. And just one final point. Obviously, you have an AT1 that was not immediate, but coming up to refinancing in January '27. And also on the senior side, can you say anything with respect to your funding and capital needs there?

I think for the year, we don't have any funding needs in terms of access to the institutional market, unless we want to prefinance some of the bonds that mature or expire in 2027. As you know, the AT1 is a discussion that we need to have with the regulator because it always -- basically always needs to approve the call of an AT1. Frankly, I didn't even see where our AT1 bond is trading today. It's a bit early, but we do have time to think about those instruments. But nothing is maturing in 2026.

The next question is a follow-up from Simonetta Chiriotti, Mediobanca.

Back to the EUR 72 million provision, does a part of this regard the contaging portfolio? So how much of this basically regards the contaging portfolio? And on the securitization, I think that you have mentioned before the possibility of using credit insurance. Can you elaborate on this?

Thank you, Simonetta. I think we are finalizing the allocation. So I don't want to give a number on the contaging portfolio. But obviously, there is overlap between the 2. I don't want to give a number on that, which I then needs to get back to. In terms of the credit insurance, it's something that we have started to work on that our projections don't assume anything.

We know that we can do better with the securitization, and we know that if we want to do more and we don't do the securitization, we can do the credit insurance this -- and we have to work with the term sheet and the insurers and so on and so forth. This would have the effect to extend the timing for the calendar provisioning as it would be -- that part of the loans could be under guarantees. That's the principle.

The next question is from Lorenzo Giacometti of Intermonte.

Just one on the EUR 72 million provision you posted. And I was wondering if this provision [indiscernible] the potential impact of the EUR 40 per invoice and yes, how much is it on the total? That's it.

Sorry, the line was really bad. If the question was when you take the provision, do we include also the impact of EUR 40 as we do consider the impact of LPI capital and EUR 40 that we -- approx. But I'm not sure if I got the question right.

Yes, yes, the question was right. And if I may follow up is just -- I mean how much is the impact of the EUR 40 per invoice on the total [indiscernible].

Sorry, I'm not sure I got the question. How much is the impact of the EUR 40 per invoice? I don't think there is a change at the moment in the policy around EUR 40 if this is what you are implying. I'm not aware of any change in that direction.

[Operator Instructions] The next question is from Satish Pulle of Seaport Global.

Can you hear me, please?

Yes.

Quick question, please. If I look at your 9-month '25 results presentation, the RWA density is 66%. Given your changes in past provisions and so on, could we expect this RWA density to increase? Could the ECB ask you to retain more CET1 or increase the SREP ratio, for instance?

As you know -- thank you for the question. As you know, we have given a range for the common equity tier 1. I don't expect any material increase in the RWA density, probably it's going to go down, but it will depend on where we end up in the range. The ECB cannot ask us, I think, anything. We are regulated by Bank of Italy. We are not having discussions in this sense. We have just received the updated target, and we have revised the dividend policy. So not from the ECB, and we are not having discussions with Bank of Italy on the top.

[Operator Instructions] The next question is from [indiscernible].

Regarding the management changement, this changement has been made in agreement with the previous CEO in terms of fixed and variable remuneration or this argument is still ongoing?

I think I can probably refer to the press release. I mean the bank is just sticking to the existing contracts on the matter. I'm not aware of any other discussion in that respect.

The next question is from [indiscernible].

I wanted to ask outside the factoring activity, does the new Board think about reviewing the other businesses where BFF is active, client services, depository bank, in particular, in Italy?

I'm not sure I understand the question. Is it they want to grow? Or do they want to sell? What is the question?

The question is if the new management intends to, in the new strategic plan, change the business mix of BFF outside...

No, I think it's -- we are very happy of the performance of the Transaction Services business, both in the depository bank perimeter and in the payment perimeter. They are an important part of our business. And again, this does not come out of the numbers necessarily, but they provide 60% to 70% of our funding and therefore, form a significant part of our profitability.

So I'd say that we already have 3 legs today, the payment, depository bank, and we have the factoring and lending in the various jurisdictions. We have an M&A strategy, which is public because it was part of our business plan and it is confirmed in its criteria. I'm sure, and I expect [indiscernible] something about this criteria in the context of the new business plan.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Giuseppe Sica for any closing remarks. Excuse me, at the moment, we have 2 more questions. If you want, I can proceed with the following question. The next question is from [indiscernible] the next question is from Lorenzo Giacometti of Intermonte.

Yes, I'm sorry, just a follow-up. Maybe I missed it. I am sure, obviously, it was asked before. And it's about the 50 basis points of CET1 -- regarding the CET1 range you guided within the full year '25 results. Maybe, I missed the answer and the second one is on the securitization, maybe I missed that too [indiscernible] when you will provide update on this process of the ongoing securitization that you appointed as the advisers that -- when can we -- when will you update the market on [indiscernible].

On the securitization, there are many constituencies to be aligned, as soon as we have news that we can communicate, we will communicate them. It is important that you know that we -- they are working on it and we are not counting on it in our numbers. Two, on the range, it's a wide range, and we will announce the full year results on the 10th of February. I think it was appropriate to keep a bit of freedom as we finalize a few items in our balance sheet. And we've been too conservative, if that's okay.

Mr. Sica, I'll turn the call back to you for any closing remarks.

Thank you, and I thank everybody for being with us and for asking very interesting questions. And I look forward to speaking to you again in the context of our full year results. Thank you. And have a good day.

Good afternoon, and welcome to BFF Bank Group First 9 Months 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would like to turn the conference over to Massimiliano Belingheri, Group CEO; and Giuseppe Sica, Group CFO. Please go ahead.

Hi, everybody. Thank you for joining us today for our third quarter results reporting. I'm not going to spend too much time on the news from our press release from last week. I think what is relevant is we are back to normal for the bank and all its stakeholders. We will return focusing on growth, value creation, international expansion and shareholder return. That's an important reset for the bank. And we will communicate in 2026 our new medium-term targets since we are at the end of our plan.

Our financial and commercial performance has continued to be strong, following the trajectory of the first 2 quarters of the year. Our adjusted net profit for the 9 months stand at EUR 118 million. That's 14% higher than the same period of last year. And importantly, the adjusted net profit is up 33% year-on-year.

On the lending side, factoring has closed September with the highest ever loan book, up 8% year-on-year. We continue to see good growth in Italy and extremely strong growth in France, as we will see. And importantly, we continue to add to our off-balance sheet reserves that have increased EUR 63 million year-on-year that the part of it is defer income we collect in due course.

Funding remains ample and growing. Our loan-to-deposit ratio stands at 73%. The deposits from our transaction services are up 1 quarter year-on-year. Repos are down. So we have a very strong liquidity position entering the peak hunting season of the end of the year. And our mark-to-market bond portfolio where I think there is value that will be seen in our numbers going forward is up EUR 56 million year-on-year, and that will support, as I said, future profitability.

On past due, the vast majority of it is, I recall, towards the public sector. We are down 6% since December and the contaging invoicing are down by almost 1/3 since the reclassification of last year. And the dynamic of the past due is mostly driven now by the continuous purchases of our business. So the front book continues to churn quite quickly.

In terms of capital, we have had the confirmation of our P2R. We report a CET1 ratio of 13.4% and total capital ratio of 16.5%. On the -- our target CET1 ratio, we have over EUR 180 million of excess equity as of September. So those are the key points that you've seen on Slide 3.

So on Slide 4, which is a summary of what we already said in the press release, let's see what we focus on today. First of all, capital return. We have EUR 108 million of excess capital to our target CET1 ratio. We have asked Bank of Italy to do a buyback for EUR 12.5 million. It's a signal of our ability already to distribute capital.

We know that we have to work on the reduction of the past due. And when this will happen, we will see reduced RWAs and incremental capital generation for the business, which with our protective dividend policy clearly protects our ability to continue to grow at a good, fast pace. So we have more capital. We have more ability to grow. We still have a lot of trapped capital for -- given the high -- relatively high RWA density. And once that gets released, we can continue to support our growth and remunerate shareholder at the same time.

Focusing on growth, clearly for us, it's important that we look not only at our domestic market, but as a strong engine of growth, which can be the international market. We have approved a new 3-year international growth plan, and we are ready to actually file the demand to open a French branch, which we think is very important for our development, particularly given the political and fiscal position of that country and also for entering Luxembourg in global custody under the freedom of service regime, which means that we can actually sell our products to Luxembourg. And that's the first foray internationally of our custody and deposit and transaction services business.

Finally, which is important after 1.5 years, the ability to reward all the team registration remuneration was I remember -- remind for all the team to reward is quite important. And the fact that banks have been lifted means that we can now continue on our core value of rewarding meritocracy with also participation in the upside that people create.

So on Slide 5, 1 year on, what has happened? Actually, we have more capital today than we had last year, even after the change in the estimate for recoveries of NPIs. RWA density is significantly down from 71% to 66%, still not there where we should be. So that trajectory will release capital in due course. And at the same time, while we have accumulated capital, we have also continued to grow the business with factoring lending volumes up 11% year-on-year and assets under depository up by 19% year-over-year, which then drives the liquidity that is needed to continue to fund our lending business.

If we move to Slide 6, let me focus on a few highlights on our balance sheet. Giuseppe will provide you more details around it. Our loan book stands now at EUR 5.8 billion, is up 8% year-over-year. It's a primary driver of our interest margin, and it's important that we continue to add to our loan book. That's actually not the case in the factoring sector in Italy, as you might have seen from other numbers reported. So we're quite proud that we continue to add to those numbers.

The bond portfolio is down year-on-year due to some maturities. And we have a positive mark-to-market, which will support, as I said before, our future profitability. Transaction services deposits are stable by nature, but they are up 25% year-on-year. It's actually driven mostly by the depository bank performance and growth in assets, which means actually we continue to add customers and therefore, incremental deposits in that business. Leverage remains very strong at 6.4% or 6.1% in the last quarter.

If we turn to the P&L, let me focus on the bottom of the page on the group PBT, which is up 13% year-on-year, with all divisions performing in line or better than last year. The expected factoring lending is actually up 15% year-on-year. That's driven by higher volumes and improved margins. Payment is down 7% year-on-year, but that's due mostly to especially entirely to internal transfer pricing on the liquidity side. And security services is up 42% year-on-year with a strong contribution also to the group liquidity and Corporate Center is also very strong year-on-year. So quite good results overall. And importantly, as I mentioned before, we have, over the period, increased our off-balance sheet funds by 63%, which is a double-digit growth over the same period.

So having summarized the main items, let me hand over to Giuseppe for more details on what you've already seen.

Thank you, Max. Let me give some more details on the positive performance of our factoring and lending business on Slide 8. So factoring and lending real yield has further improved the spread versus the ECB rate, which drives LPI and also our cost of funding has gone from 3.25% in 2024 to 4.41% in 2025. This means, together with loan book increase that revenues net of cost of funding are significantly up year-on-year, and explain the 15% increase in PBT mentioned at the beginning of the presentation.

LPI over-recovery is also up year-on-year and rescheduling, as we have said in our first half presentation, have normalized post first quarter. And once again, our off-balance sheet has increased EUR 63 million or 13% year-on-year.

Moving to the commercial performance of the business on Slide 9. Loan book stands at EUR 5.8 billion. This is the highest ever 9 months for BFF and up close to 10% year-on-year. The loan book in Italy continues to grow and is up double digit compared to last year.

Underlying the loan book growth is the strengthened commercial performance and also supportive environment with volumes up 11% year-on-year at EUR 6.3 billion. Italy is up 16% on the year. Poland, 38% on the year. France, 12 months on is larger than Greece, and we expect significant support from branch opening in a country with strong potential.

Very quickly on Spain, which continues to catch up. So volumes in third quarter were at par with volumes in the first quarter of 2024. This is positive news.

Now very briefly on Slide 8 (sic) [ Slide 10 ] on payments. We talk about stability, but really both number of transactions are up year-on-year, 1% and 2%. And importantly, for us, also deposits are up year-on-year. So it's performance in line, if not better, compared to expectations.

Next slide on securities services. Assets under depository are up 11% year-on-year despite some delay in client migrations, which we expect to happen in the next few quarters. Revenues are up 14% year-on-year, in line with the overall group growth and the liquidity provided by the division stands at EUR 4.1 billion, which is up more than 40% year-on-year. And this also contributes to the reduction of other more expensive sources of funding such as repos.

Quickly on group costs on Slide 12. We maintain our cost discipline while we keep investing in growth. The cost income stands at 46% and is down year-on-year within an overall flat cost base.

At a divisional level, factoring and lending is up 2% year-on-year. Payments costs are slightly down, while for securities services, OpEx and D&A are up 6%, mainly in relation to ICT system upgrade to support the future growth that we expect. 2025 variable remuneration will be accounted for in the course of 4Q in line with accounting principles.

Slide 13 on our balance sheet. We are pleased with the composition of our balance sheet. The liquidity remains abundant, but also diversified. The loan-to-deposit ratio remains very strong at 73%. The NSFR is at 136%, was 129% 1 year ago as we reduced past due. And the LCR stands at 219%. This is slightly down compared to last year as we now have most transaction services deposits. The held-to-collect portfolio continues to be managed and is down EUR 400 million on the year, mainly due to maturities.

The mark-to-market is positive. And we stress once again, we have around EUR 1 billion of fixed rate portfolio with an average yield of 0.59%. This is a drag to our profitability and this portfolio is gradually reaching maturity.

Slide 14 on our asset quality. So the underlying low-risk profile is confirmed. The cost of risk for the 9 months stands at 4.7 basis points. This is in line with the first half and in line with BFF historical averages.

The NPE stock affected by the June '24 reclassification is down EUR 108 million on the year, and I will explain the underlying dynamics in a moment. The NPE exposure is almost entirely towards public administration, which is 97% of our NPEs. We continue to classify a NPLs also the conservatorships for which we are looking at a ruling by the European Court of Human Rights. And as you know, we have received positive ruling already on 3 cases. We are waiting for more to come.

The draft 2026 budget law also introduced a EUR 2.2 billion fund for 2026 to address the financial effects from national and European disputes. And this potentially includes also the effects of the European Court of Human Rights decisions.

On the following slide, on the evolution of our past due portfolio. First, in the 9 months, we only have EUR 144 million of new net in past due, and these are public administration. Second, excluding the net new exposure, which we have bought in the year, past due has gone down by 44% in 9 months. This means that we continue to buy and collect on our portfolio. Third, the contaging invoices are down by another EUR 48 million in the year -- in the 9 months and there's seasonality, of course, in the third quarter due to August. Fourth, the new business from PAR in past due explains the increase in new business in the past due.

By mid-October, we had already filed around 870 injunctions towards the public debtors, representing 83% of our debtors in past due in Italy. This is an acceleration on our collection activity compared to 2024 when we had filed for the whole year 670 injunctions. So we will have to see the results of these injunctions as they become collectible. This should and will support further past due reduction.

Last but not least, some more detail on capital on Slide 16. We have generated close to 300 basis points capital in 12 months with about EUR 5 billion RWAs. As Max said, RWA density is trending down and past due reduction will be an important driver to continue this trend. We, therefore, have EUR 108 million of excess capital versus the 13% CET1 target. It was EUR 114 million versus 12% target ratio in June. Excess versus that target is EUR 180 million.

Let me now hand over back to Max for the key takeaways on our business.

Thank you very much, Giuseppe. So let me conclude with a few takeaways. First of all, in the first 9 months, we have shown an even stronger balance sheet, and we continue to deliver with a positive commercial performance. Second, we focus again looking at the long-term value creation to balance business growth with shareholder remuneration. In the context third of a position with excess capital, but with a higher overall level of capital to protect our business.

So with that, we conclude the presentation. Thank you, again, Giuseppe, and we are ready to take your questions.

[Operator Instructions] The first question is from Tommaso Nieddu of Kepler Cheuvreux.

The first one is on the capital management action. You have mandated adviser to evaluate strategic options on your credit portfolio. So can you give us a sense of the scope and the time line of this mandate? And if you have quantified the potential CET1 relief or risk-weighted assets reduction that this transaction could generate?

And the second one is on the EUR 88 million of net income not allocated to the CET1 ratio. Should we read that as an early indication of the dividend payout you are planning for the year?

Thank you, Tommaso Nieddu, I will start with the first question on portfolio management. The company focuses first on the organic reduction of the past due. This is the healthier thing to do to manage properly the business. We are working with advisers on a potential securitization. I think the perimeter is still to be defined. So it's too early to give numbers. However, given that we have a large contagion effect, it is fair to expect a significant reduction not only of past due, but also RWA when this happens. It won't be huge. We don't need to go huge as this will be mainly referred to part of the contaging portfolio. And what we plan to place on the market is the junior notes, which is an even smaller number.

In terms of dividend, well, as we stated quite clearly, we have excess capital compared to our CET1 ratio target of 13%, but then we have a number of moving parts. So for instance, we have the EUR 12.5 million of share buyback. And depending on the timing of the authorization, we might have to deduct them this year or next year. So we don't commit today to a dividend level, but the trajectory of the capital is the one that is indicated in the presentation.

The next question comes from Giovanni Razzoli of Deutsche Bank.

A couple of clarifications. The first one is on Slide 25. I've seen that in the other income line, there has been a quite strong acceleration of this line item. If you can please clarify when compared to the previous quarter to the run rate also in '24, if you can please clarify what is this EUR 11.5 million that I see here.

Second question is on the addressable market in France. Can you share with us what is the addressable market for factoring in France and also give us an indication of how it will be relative, for example, to Italy and Poland?

And the last question is, I've seen that there has been on a quarter-on-quarter basis, so third quarter when compared to June, a decrease in both of the stock of deposits of security services, but also on the payments and also on security services, it seems to me that the reduction in the payment is a little bit higher. I was wondering if you can please explain why there was this trend, if it is related to seasonality or what is attributable?

Thank you, Giovanni. On the stock of deposits, yes, there are seasonalities. Bear in mind that we have close of payment coming depending on what is the -- sometimes the day of the month where we close the day when we close the month, you have different movements on security services, there are different asset allocation that can be -- can explain a large portion of that. What is important for us at the end of the day, what drives the flows in both cases is the volume of transaction on one side and the volume of assets and the depository on the other, which are both up year-on-year.

On France, look, the market is significant because the overall expenditure in goods and services by the French public administration, out of memory based in our annual report, is around EUR 160 billion. A few years ago, when we looked at France in the report of Bank of France, they indicated roughly 20% of the receivables were paid late. So that would mean already EUR 32 billion.

Importantly, France a few years back is not the France of today. And with the pressure on public finances, we expect payment times to worsen or certainly, the perception of our client is that those payment times will worsen. So when we look at France originally, we thought that it could become as big as Portugal and Greece combined in terms of stock. And we are now, if you look at Page 9, in terms of stock, we are at roughly half of where Greece is. So if you combine Greece and Portugal, is actually a quarter. So there's a long runway to go, even if we just follow what was our normal expected development.

But we think actually France today, particularly until the next presidential elections in 2027, can provide significant upside for the group. And that will be even more so with a physical presence in France, which help us 2 ways. One is to develop the French market, but second, also to be close to French companies that don't only have public sector receivables in France, but also in other geographies. So for us, it's clearly a very welcome development, the ability to now open a physical presence in France.

On the other 2 points, other income is up on the year also because in the third quarter, as we highlight on the presentation, we affected a small disposal of government bonds, which we then bought increasing the duration by probably 3 months, all else being equal. It's important to stress that because most of our portfolio is a floater, this really means moving part of the net interest income and other income. So that's consistent also with the messages that we have given last quarter and repeated today that the mark-to-market is going to support profitability going forward.

On the liquidity, I do not see any specific trend. There is some seasonality. We manage actively repos and retail deposits. And these are 2 lines that we have been able to bring down year-on-year. So there is no negative trend there. Of course, we will have to monitor over the next few quarters what is the right level of repos and retail deposits to have.

So thank you, Giuseppe. Just for a clarification. So the EUR 11.5 million the quarter-on-quarter increase also the increase versus the Q1 is largely related to the impact of the disposal of government bonds?

Yes.

The next question comes from Manuela Meroni of Intesa Sanpaolo.

The first question is on the contenting portfolio. It has been declined by just EUR 7 million in this quarter. So I'm wondering if the reduction in the pace of reduction of these portfolio is just due to the summer season or there are other reasons behind this trend and what we can expect in the last quarter of the year. So an acceleration and a recovery of what has not been done in the summer season or, let's say, you can guide us in another way?

The second question is on the common equity Tier 1. Could you please clarify what portion of your net profit is included in the common equity Tier 1 as of September?

And the third question is on your business plan. I understood that you are going to update and present a business plan in 2026. I'm wondering if it is '26, '28 business plan. And if you still feel comfortable with the year 2026 or you are going to revise them during the presentation of the new business plan?

And finally, a clarification on the dividend policy. You said the new threshold at 13%, is still there the cap of the dividend related to the net profit generated during the year?

Sorry, we're struggling with the technology. The 13%, the new threshold is yes, it still has a cap of having distributing more than the adjusted net profit for the year as before. On the business plan from 2026, yes, we plan to revise the business plan. We are still discussing this is going to be 2028 or 2029 target, to be honest, and we'll do that after we conclude our budgeting process that usually -- well, actually always concludes in January after we actually have the year-end stock of receivables clear.

On the contaging portfolio, yes, seasonality has an impact. It's not so easy to get the public sector to pay receivables in August. This is not -- maybe they are not recent. And we expect the last quarter to be more fruitful also because there are much more transactions with the public sector where we collect LPIs, EUR 40 and that usually is a good way to clean up also the back book.

The last question on the equity. It's around EUR 20 million of the net income that is included in the common equity Tier 1.

Could you repeat, please?

Around EUR 20 million is included.

The next question comes from Simonetta Chiriotti of Mediobanca.

I have a question on volumes and in particular on the PA segment, that in the 9 months was quite weak and in particular in the third quarter, the new volumes in this segment were very low. So if you can explain the reason of this trend.

Yes. The -- we continue to see on public administration, less interest from customers to transact there. So that's part of our commercial effort to strengthen the activity on that front. On the other hand, we are quite pleased by the extremely strong growth on the health care side, where we're growing in Italy, if you look at Page 26, 30% year-on-year. So that clearly the bedrock of our business, the public administration represents an area where we need to get our delivery in terms of execution right.

The next question is from Davide Giuliano of Equita.

The first one on LPI over-recoveries. What can we expect in terms of the aggregate of LPI over-recoveries and rescheduling in Q4? And what impact can we expect also from the MBO and let's say, one-off variable personnel costs always in Q4?

The second one, if you can comment a little bit more on past due in the quarter, which increased compared to last quarter despite a slight contraction of the contaging portfolio. It seems that there was a positive contribution coming from new debtors in past due. Could you give us more color on this? And can we expect EUR 50 million per quarter going forward, which seems the average for 2025 so far?

And the last one, if I may, what can we expect in Q4 in terms of results from the injunctions you filed so far?

Thank you. Well, we don't give numbers on Q4 until we actually get Q4. There are a lot of moving parts, so both on LPIs and results in the injunctions, we can comment. They actually come usually at the end of December. So that's early -- we are early in the quarter.

In terms of past due, let me focus for a second on Slide 15 because there are things which are relevant and there are other which are a bit noise. The noise is the EUR 505 million that you see in gray. Why is noise that, frankly, it's what becomes in past due because we continue to grow the business and we generate more volumes. Then it happens or not happens that what we purchase is in past due or not, we continue to behave in the same way versus our customers. And we know that, that's a portfolio that will disappear in past due if we dismantle the back book.

So actually, if you look at what we keep an eye on in terms of the inherent past due generation of the business is the second gray column, the EUR 144 million, which is actually relatively low that indicates both how much is the total of new debtors in past due, which is both contaging and infected portfolio for new debtors and tells you how much we generate of incremental past due on an ongoing basis. If you compare that with what we had historically in terms of past due in the business before the reclassification, which was around EUR 300 million, we are not that far off. So in a normalized situation, we should trend down to a similar level, but it's probably higher given that the business has grown. But in terms of overall level of past due to the loan book, that's where we should trend up.

Now where should we work? We should work on the back book because as you can see from the same slide, actually, the December 2024 book has halved in terms of past due simply by collecting or having entities that have exited from past due. So that's, I would say, very positive trend. Here, what you don't have, which you see in the second footnote, which I think is even more positive message. There are almost EUR 800 million of new purchases on back in past due that has been purchased and collected in the period. So the turnover is even higher than you can see here because still we are taking stock and stock on the 2 days.

So it's a portfolio that churns quite a bit. And what is important is that actually the new debtors in past due are only EUR 144 million. And we got actually debtors out of past due of EUR 268 million, which if you want is the net is the trend of really reduction of the inherent past due in the portfolio.

On personnel, yes, we accrue at year-end. We'll also do it on the basically of the reported number. Usually, in the year-end, we have a slightly less accrual because we have releases. In this case, we'll have more cost.

[Operator Instructions] Gentlemen, there are no more questions registered. This concludes our question-and-answer session. I would like to turn the conference back over to Massimiliano Belingheri and Giuseppe Sica for any closing remarks.

Thank you, everybody, for joining us today, but also thank you for spending a lot of time with us over the last 1.5 years to understand the business, what was going on and following us. I think now say back to a more normalized situation, we have work to do in continue to release the capital through the back book and capture the opportunities ahead of us commercially, but we are quite positive on the trajectory of the business going forward. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to BFF Banking Group First Half 2025 Earnings Call.

[Operator Instructions]

Please note this event is being recorded. I would like to turn the conference over to Massimiliano Belingheri, Group CEO; and Giuseppe Sica, Group CFO. Please go ahead.

Thank you. Thank you, everybody, for joining us today for the reporting of our first half results. Let me, first of all, say that we don't have any direct update on our discussion with Bank of Italy, and we'll clearly give an update as soon as we have disclosable information.

So let's focus first on our financial and commercial performance. In the first half of the year, we continue improving our financial and commercial performance on the trajectory we set already in Q1. The adjusted net profit stands at EUR 75 million, up 6% year-on-year. Equally importantly, the second quarter profit is also up 6% sequentially and 37% year-on-year, a good trajectory for the business. Factoring & Lending has continued also its positive path. It's PBT -- PBT of the division is up 21% year-on-year and the loan book in volumes are the highest first half ever for the group and are just marginally shy from the record balance sheet of year-end.

Not only reported profitability is up, but importantly, also the future one continues to build up. In fact, our off-balance sheet reserves has grown EUR 93 million year-on-year, faster than our loan book growth. We continue to deliver on growth while keeping a substantial liquidity. Our loan-to-deposit ratio stands at 77% and the highly stable transaction services deposits are also growing 31% year-on-year.

The rate spread environment continues to support the mark-to-market of our held-to-collect portfolio. Now the positive mark-to-market is close to EUR 50 million, an improvement of over EUR 100 million year-on-year, and this will also support our future profitability.

Moving to capital. Our CET1 ratio stands today at 14.3%, which is well above the level that we registered pre-credit reclassification at the time the capital was 17.5%. We've generated over 200 bps of capital in the first half of this year alone. We have EUR 114 million of excess capital versus the 12% CET1 target, EUR 75 million of which are related to our first half adjusted net income.

Furthermore, if you look at our SREP level, we have EUR 226 million of excess capital, so a substantial buffer also towards that. As we have repeated in the past, our dividend policy remains unchanged. We are waiting the removal of the banks of Bank of Italy, as we mentioned before.

Looking at past due, we are pleased on our progress on the past due to date. Our past due shifted towards government and public sector down 10% in the last 6 months. If we consider only the portfolio we had at year-end that has seen a reduction of 40%. And that gives a sense of how much we're actually reducing the portfolio -- the growth of the portfolio of the past due has been driven instead by further purchases of debtors already past due and a marginal increase in the past due portfolio.

Also, what we call the Contaging invoices progress continues. We have done close to 30% in a year. We continue to take action to reduce that portfolio.

A few points outside of our numbers. First of all, we have renewed our ICT contract with Nexi, which as you know, underpins part of our transaction service activities that has been renewed until 2032, and it has given us some strategic flexibility into intellectual property ownership on the infrastructure.

Second and importantly, we obtained further European Court of Human Rights rulings on the municipalities in conservatorship, which proves again the state needs to pay those public exposures. In the meantime, we have filed appeals to the European Court of Human rights for additional EUR 40 million of capital on municipal conservatorship, that's roughly 40% of our NPL portfolio and another EUR 25 million on past due exposures.

Third, following receivable, the regulatory authorization and the support of our partners. We have launched our deposit gathering platform in Greece. This is another step in our funding diversification, and we'll launch a massive campaign in the last part of the year to increase that activity. And finally, you might have seen the logo, we have the presentation we celebrated on the 22nd of July, our 40th birthday. That's an important step in our history and a history which has seen so many successes, and we wish all of us and allow our shareholders many successes to come.

If we look at Page 4 on the balance sheet. I would highlight a few things. First of all, the loan book stands at EUR 5.9 billion. And as I said before, it's up 5% year-on-year. The loan book size is actually the main driver of our interest income together with other recoveries of LPI. Our held-to-collect portfolio is down 7% on year-on-year, we are managing down particularly on the fixed rate side.

The mark-to-market, as I mentioned, is now positive and is increased by EUR 134 million year-on-year. That means that actual future profitability is better as the cost of carry becomes a positive carry over time on the fixed bond portfolio. And importantly, we continue to have positive spread on our variable rate portfolio.

On the liability side, as mentioned before, transaction service deposits are up 31% year-on-year. Those are stable, driven mostly by decision of our clients on their asset allocation. But importantly, by the volumes of our activity with them. We have a strong growth, for instance, in our depository bank activities at 20% year-on-year growth.

Given that liquidity, we've actually reduced our deposits, which was down 39% year-on-year and the online deposits and repos, which are down 13% year-on-year. Leverage remains strong to 6.1%. Our loan-to-deposit ratio is at 67%, which is an improvement in -- over last year, which confirms ample liquidity in the group. And we talked already about our CET1 ratio, again, are a very high capital ratios with 14.3% CET1 and plenty of buffer versus our 12% target in our [ SREP ].

If we move on the P&L on Slide 5. Our adjusted net income is at EUR 75 million, up 6% year-on-year and 37% versus the second quarter of 2024. Let me speak in more detailed data about the drivers of our performance. And it's important to stress that profit before tax of our factory lending division is actually up double digit, plus 21% year-on-year, which underpins the future growth of the business. Also, security services is significantly up 43% year-on-year. Payments on slightly down by ahead of budget, and we see plenty of opportunity to deliver further growth and profitability in that business.

Having said that, I leave now the floor to Giuseppe to walk you through the details of the numbers. Thank you.

Thank you, Max. Let me give you some more details on our Factoring & Lending business on Slide 6. The gross yield has not only resilient, spread versus ECB rate has, in fact, improved. And let me remind you, ECB rate is the key driver of our cost of funding. So MRO rate is down 135 bps versus gross yield down 74 bps. Spread resilience explains, together with volumes, I will talk about in a moment, the 21% increase in the PBT of the division. And schedulings are normalizing and improving quarter-on-quarter, EUR 6.2 million in the second quarter versus EUR 12.7 million in the first. Other income is mainly driven by continued collection of recovery fees.

Looking not only at the past, but also at the future profitability, our off-balance sheet funds have increased EUR 94 million in 12 months.

Moving to the commercial performance of the business on Slide 7. Loan book stands at EUR 5.9 billion, the best first half for loans and the key driver of net interest margin. Our loan book in Italy continues to grow and is up 5% compared to last year. Spain, on the other hand, is down, reflecting lower volumes after planned depart at the end of last year.

France loan book continues to grow. Reflecting on commercial performance. Volumes are up 10% year-on-year at EUR 4.2 billion. Volumes in Italy are up 17% year-on-year and up 41% in Poland, albeit with a different business mix.

Portugal, which was down 6% in the first quarter is up 9% year-on-year. And finally, France even before the future opening of a branch in the country, in only 12 months after launch of meaningful business is already at the same level of risk, which in itself growing.

Let me move now to Slide 8 on payments. Both revenues and number of transactions are up 1% year-on-year, proving the resilience of the business. The division provides circa EUR 2.8 billion of deposits to BFS, which are also up 2% year-on-year. Continuing to invest in the business, we have extended ICT contract with Nexi to 2032. We have signed agreement with Nexi and equensWorldline for domestic intermediation with intellectual property ownership for critical IT applications remains with us. And we have become exclusive provider of domestic settlement cut service for the equensWorldline.

Next slide on Securities Services. As Max said, the division has recorded very strong performance during the year. Assets under deposits are up 20% compared to 1 year ago and very meaningfully for the business, they are back to pre-Arca as we continue to be a provider of choice of several alternatives, specialized funds and pension funds. Revenues as a consequence are up 13% versus 1 year ago.

Liquidity provided by the division has now reached EUR 4.4 billion, which is up 62% year-on-year and is allowing an efficient management of our liquidity profile for instance, as Max said, by reducing our online deposits.

Slide 10 on group costs. We maintain our cost discipline while investing in growth. In fact, OpEx and D&A are up 4% year-on-year with lower personnel costs and higher G&A mainly due to meaningful IT expenses. At the regional level, Securities Services, OpEx and D&A are up 6% year-on-year in relation to ICT systems upgrade. Factoring & Lending at EUR 24.3 million, up 3% year-on-year. And for payments, OpEx and D&A are only slightly up year-on-year. As in the first quarter, any variable remuneration for the year would only be assigned after the removal of Bank of Italy banks.

Now let us move to our balance sheet and its strong profile on Slide 11. We are pleased with the composition of our balance sheet and continue to work on marginal improvements. The loan-to-deposit ratio remains very strong at 67% showing ample liquidity and is further reduced compared to 1 year ago when it was 69%. NSFR is 143% compared to 134% one year ago. And LCR is also up from 209% 1 year ago to 249%. In essence, we feel liquidity sources remain abundant and diversified, and we continue to diversify with the launch of our deposit platform in Greece.

Moving to the asset side, our HTC portfolio continues to be managed down and is down almost 10% year-on-year. And importantly, mark-to-market is positive and increased by EUR 124 million year-on-year, which bodes well for future profitability.

Slide 12 on asset quality, showing our low risk profile is confirmed. Our cost of risk in the first half stands at 4.6 basis points, broadly in line with historical averages. Our NPE stock affected by June '24 reclassification is down 10% year-on-year. And I will expand on the underlying dynamics in a moment.

Let me stress once again that NPE exposure is almost entirely towards public administration, 96%, which is, by definition, low risk. Looking at the details of our NPLs. Also these are largely towards public administration and in particular towards municipalities. We are pleased to have received the new ruling confirming Italian State liability receivables due by three municipalities in conservatorship and in the quarter, we have appealed to the European Court of Human rights for circa EUR 40 million receivables towards municipalities in conservatorship, which represents 40% of our NPL portfolio. EUR 40 million by the way, is already capital with significant upside from collection of LPIs.

As mentioned, let me now give you some more detail on the evolution of our past due portfolio on Slide 13. First, excluding net new exposure, which we have bought in the year, past due has gone down by 40% in 6 months. This is important as it shows the high churn of our portfolio and our collections. Second, contaging invoices are down by another EUR 41 million in the first half, and we expect more as new injunctions take effect. Third, new past due is mostly due to contaging effect EUR 419 million. New past due generation is limited to EUR 96 million in the 6 months.

I promised a few more details on our legal activity supporting transactions or traditional collection. By the end of July 25, we have filed in Italy around 840 injunctions towards public debtors, and this represents around 82% of Italian past-due exposure and around 64% of the total past due exposure. We have appealed for EUR 25 million more involved in past receivables to the European Court of Human Rights in addition to the appeal on conservatorships. This should and will support further past due reduction.

Last, but not least on capital -- Slide 14. CET1 ratio stands at 14.3% versus 11.9% in the first half of 2024. And in the first half of the year alone, we have generated 207 basis points of common equity Tier 1. This is supported both by past due and RWA density reduction and by the profitability of our business. We, therefore, had EUR 114 million of excess capital versus 12% common equity Tier 1 target and 226 million versus SREP requirement.

Total capital ratio stands at 17.4%, while MRL requirements are covered with ample buffer, thanks to organic capital generation and the 2 bonds that we have issued last year. As said by Max, the dividend policy remains unchanged, subject to the listing of the dividend down by Bank of Italy.

Let me now hand over back to Max for the key takeaways on our business in the first half of 2025.

Thank you, Giuseppe, for the deeper presentation. Look, if you leave for [ set of ] details, what we are seeing today is a confirmed positive momentum for the group with double-digit growth year-on-year, both factoring & lending securities services and good strategic positioning of our payment business. We have reached the highest first-ever volumes and group loans for the Factoring & Lending business. Secondly, the reduction of past due is underway with total past due portfolio down 10% versus year-end 2024 despite us continuing to buy new receivable towards entities already in past due. We are accelerating legal actions, so we should see an acceleration of the reduction of the overall stock in the contaging portfolio in the quarters to come.

And finally, we are in a pretty strong position in terms of capital because despite the still high level of past due, which is far away from where we should be in a normalized situation. Our CET1 ratio is at 14.3%. We have EUR 114 million of excess capital versus our CET1 target for dividend. And so we think we are in a strong position to continue to grow the business, generate further capital and in due course, reward shareholders. Thank you for listening to our presentation. I will leave the floor to any questions you might have.

[Operator Instructions]

The first question came from Tommaso Nieddu from Kepler Cheuvreux.

I would have two for now. The first one is on full year estimates. It seems that consensus is sitting between EUR 175 million, EUR 180 million on adjusted net profit. So I would be appreciated some colors on that? And do you feel comfortable with these numbers?

And the second one is on the contaging portfolio collection. Clearly, the past due exposure is going down. But in the second quarter, your collection of contaging portfolio has been only EUR 16 million. So should we consider it the new run rate? And now that the back book is getting smaller. Is it more difficult to collect or -- yes, that's it.

Yes. On the Contaging portfolio, look, there are quarter -- slower quarter, it depends really on where we are with the discussion with the counterparties, where we are with legal action. So one cannot pinpoint to a specific number that we target. We target to reduce that portfolio, which actually will mean an acceleration also going forward. You should bear in mind that we are only a year -- not even a year away from the reclassification later last year, and we started to change our approach on legal actions at the end of 2024.

And as we said, we were expecting an acceleration in the second half of this year of the collection of the past due portfolio.

In terms of full year estimates, as you know, we don't give targets for 2025. You should remember that we always have a stronger fourth quarter, which accounts for more than a usual quarter, and we are trending towards level that we think is consistent with our business plan target.

The next question is Simonetta Chiriotti of Mediobanca.

My question is on volumes. The second quarter is really brilliant in terms of volumes in most geographies. So is it possible to have a bit more color. I've seen that the PA segment improved a lot in the second quarter and also Spain was better than in Q1. So could you just elaborate a bit on this?

On volume, we are working hard to improve our commercial performance on many fronts. As you know, we also have a lumpiness in the decision of customers to sell their receivables. We are overall pleased with the performance of Poland. We think Italy, although showing decent growth in volumes and still a lot of potential to be expressed. Spain, which is down year-on-year. So it's down year-on-year about 20% still is impacted by the injection of cash we have seen by the government in Q1 and Q2 has been less relevant clearly because it's an effect that impacted mostly Q1.

And those, I would say, are the main driver. We think Portugal has more to go as well. So it has grown year-on-year, but we see more potential. And interestingly, on the smaller markets, you can see France, as Giuseppe pointed out, that has shown very strong growth from a small base, but now in terms of portfolio, it's already at half the size of Slovakia. And this space, it will reach the size of the smaller market pretty soon.

So we see that as an opportunity, which is driven by the reconsideration people have on the financial conditions of the country as well as potential risk on the political stability of the country itself. Slovakia as well, it's a tiny market, we need to see what happens in the following quarters, but pattern seems pretty good. And we know that that's a market where the budget deficit is quite high, so they should help focusing the customers' attention on it.

If I may complete the question. We have, in the first 6 months, a 10% growth in volumes and the 5% growth in loans, should we -- can you give us an indication of how the DSO is evolving in the largest market?

We're not seeing strong trends one way or the other. Remember, we buy what our customer give us and depending also on when we buy in the quarter, we have a different outstanding at the quarter end. So for instance, in the second quarter, we did more purchases in proportionally than usual in April and May and less in June. And so that actually skews the 2 effects. And you have markets also where we buy portfolios, which are not necessarily representative of the overall market.

If I take France for instance, we buy portfolios that we paid later than normal DSO. So you can't really -- we are not seeing any individual performance of counterparties with significant improvement or worsening of payment times. I don't agree, we're not making changes to our pricing mechanisms to take into account either shortening of lengthening of payment times.

The next question is from Davide Giuliano of Equita.

I have three. The first one on NII. Overall, interest rate environment was, let's say, good in first half as Euribor decreased while LPI rate was fixed at the beginning of January. Now that the LPI rates are fixed in July and the ECB is expecting to cut 25 bps by year-end, which dynamics do you expect on NII in the second half?

The second one on the Casse di Previdenza. When do you expect the tenders to start? And what margin can we expect on these mandates for the Security Services division?

And the third one on capital allocation. I know that dividend is the priority, but there has been some movement in the Specialty Finance segment and also some things are going on. My question, I was wondering if the excess capital you have accumulating during the dividend ban, if do you see opportunities for organic growth initiatives?

Organic or inorganic?

Inorganic.

Okay. Got it. Okay. Look, we look at M&A as stated in our strategy all the time. And it depends on the opportunity, the right price, the right moment, the right target. So it's not really an issue. We have capital, so we buy. Capital is there, but it's actually our shareholders' capital. So it has an opportunity cost that we need to be mindful of. As we always stated for us, I mean, it's an avenue mostly for diversification, and we continue to monitor the market in Italy and also abroad. In terms of the Casse di Previdenza, the [ decree ] has been actually has been actually ready. We know that the under Secretary of the [indiscernible] stated in June that we should expect the publication shortly. We think there's still a bit of a delay.

For us, actually, it's a positive because it means that when it will be issued, hopefully, we will get in a position where we don't have the restrictions imposed on us by Bank of Italy, and that would take away some concern that client might have on us as a trustee of their assets. So at the moment, a delay is actually for us positive. We expect something to happen in the fall.

In related to NII, Look, I think the movement in interest rates of that magnitude are not really -- don't change dramatically our P&L. Frankly, what will drive the NII in the second half is going to be the growth of our loan book and also our ability to collect late payment interest and the recovery fees. And I think one item, which gets overlooked a little bit in our presentation at times is actually how big and how much it grows our off-balance sheet reserve.

And if you look where we are today compared to last year, that off-balance sheet reserve has increased by EUR 93 million to EUR 561 million. Now EUR 93 million, if you want a portion of it, what will come from 65% to our average collection rate, which is just shy in the long term of 80%. So let's take 1/3 of that amount, slightly more, is actually if you want normalized earnings that we have, we are simply deferring.

And so when you look at our results, you need to take into account that actually, we are still deferring a lot of income and continue to accumulate profit reserve that will show up in our accounts going forward. And our ability where we collect the past due is also to negotiate a transaction with our debtors where we collect those LPIs and EUR 40 and also when it's allowed interest on interest like it.

The next question is from Antonio Reale of Bank of America.

It's Antonio from Bank of America. Apologies if you've answered this question already. I've been in between calls, and so I missed the first part of your presentation. My question is really around the past due and the Contaging invoices, which are down again, I think, by some EUR 41 million or so in the first half. And the progression has been quite good on the organic side. And so my question, I know you've been open to both organic as well as inorganic initiatives for the bank. So what would be the pros and cons of you to explore a disposal of a securitization of a big chunk of your contaging invoices. Just because looking at from the outside, and I'm conscious that we don't have the full details, but it looks extremely appealing as a way to really put to bed this issue. So any thoughts you can share around just the sort of the qualitative pros and cons of pursuing this option would be super helpful.

Antonio, look, the -- when we look at our contaging portfolio, we have, at the end of the day, a number of levers where we can collect organically and clearly selling that portfolio even in a securitization where we will probably sell the junior notes to achieve the consolidation, therefore, have a pretty strong capital impact, as you point out, still leaves some money on the table. And also, we want to be in a position where our collection processes are fine-tuned so that a purchaser of that portfolio will clearly be even more comfortable about those invoices being collected in due course with clearly interest as well. And so the -- we are working on that. We're working also on preparing for a potential disposal, which also means thinking what portfolio we might want to dispose of because of that contaging portfolio, a portion is -- has a high multiplier, if you want. So if we sell that, we actually get rid of proportionately larger share of the infected portfolio, so to speak.

There are other portion of that portfolio where that effect is not as strong. So probably doesn't make as much sense to sell. So it's that consideration. The business continues to generate a lot of capital. And we think at the moment, we don't really need to put pressure on that. At the same time, we don't want to be in a position where we need to take provision on that portfolio. So we want to be ready ahead of that to potentially dispose of those assets.

I think if you look at Page 13, we take a lot of comfort by the fact that this is a very dynamic portfolio. And the fact that we have reduced in 6 months, 40% of what we had at year-end, which by the way, a portion of which was after that we purchased after the reclassification, if we were to look at, actually the previous portfolio would be gone down even further, gives a sense of how dynamic the portfolio is. And we think we have with the acceleration in legal activity that Giuseppe mentioned before, quite a lot of levers to deliver a reduction in the overall portfolio. But we keep the option of also selling or securitizing, which is probably the most likely outcome that portfolio as one of our tools. And also all the support from a regulatory point of view that makes securitization effective easier. It's also welcome because it means actually we can execute on a shorter time frame than it was normally expected in the past.

[Operator Instructions]

The next question is a follow-up of Simonetta Chiriotti of Mediobanca.

So a question on LPI over recovery and the impact of rescheduling. So the negative impact improved. So it's lower in the second quarter but remains negative and relatively high. Do you expect an improvement on this metric?

We have seen already an improvement by definition -- as you said, the second quarter is better than the first. Let's also remember that the rescheduling is what we account at the moment of rescheduling, which means that actually that yield does then translate into interest income in the following period. Now we certainly want to -- we certainly aim to improve substantially our LPI over recovery. That's not where we should be by any mean. I think the team has a decent pipeline. And overall, our level of over recoveries in terms of recovery rate has been exactly in line with what we expected and what we have seen historically.

So yes, we expect to do more. Yes, we expect to do more in the second half of the year, and we are aiming to get a pretty good result in Q4. Now that depends not only on us, but the fact that we have moved from ordinary legal action to injunction should accelerate those results because we have counterparties that are less -- will have less time to actually wait before they have to pay.

This concludes our...

Sorry, in a sense to add to it, Simonetta, it's a bit what I said before on the increase on the off-balance sheet fund. So the fact that we actually had a low net over recovery, but we increased our off-balance sheet fund by EUR 93 million of which a portion of EUR 15 million over EUR 35 million, it's roughly 40% is what will be our standard over recovery means actually we have created that value that we don't see in that accounts yet but will be actually recovered over time. And that's something which is helpful to focus on, partly because now the comparison year-on-year, you see the same level of LPI recognition. And so that's an important data point, which I think has overlooked as mentioned before.

This concludes our question-and-answer session. I would like to turn the conference back over to Massimiliano Belingheri and Giuseppe Sica for any closing remarks.

Thank you, everybody, for joining us today, later in the day, and I'm sure later also in your plans for holidays. We wish you a good break for the ones of you who are having one, and I'm sure we'll have plenty of opportunity to speak with you and meet you in other investor meetings and calls over the next few months ahead of our Q3 results. Thank you.