Press Releases - Investors - BFF Banking Group
PR & Presentations
- €105.4m Adjusted Net Profit +33% YoY, with strong performance of Factoring & Lending and positive contribution of Securities Services. Full impact of synergies in Corporate Center. €93.0m Reported Net Profit
- Strong growth in the loan portfolio at €4.8bn , +37% YoY at a new historical high
- BFF won confirmation from EU Court of Justice on the right to recover at least €40 per each overdue invoice towards the Public Administration, resulting with an additional off-balance sheet reserve of €237m and ~€50m of yearly accruals
- Good asset quality with 0.2% Net NPLs/Loans ratio excluding Italian municipalities in conservatorship. Public Sector’s Past Due increases due to more stringent "New DoD” interpretation criteria from Bank of Italy issued in Sept-22, despite no change in underlying Group risk
- Strong capital position: CET1 ratio at 13.8% and TCR at 19.3% excluding 3Q22 net profit, 15.1% and 20.7% including 3Q22 net profit
- €36.8m of accrued dividend in 3Q22, next semi-annual payment after AGM of Apr-23
- No ECB funding to be refinanced (ie. PELTRO, TLTRO, etc...)
Milan, 10th November 2022 – Today, the Board of Directors of BFF Bank S.p.A. (“BFF” or the “Bank”) approved the first nine months 2022 consolidated financial accounts .
CONSOLIDATED PROFIT AND LOSS DATA
9M22 Adjusted Net Revenues were €275.0m, of which €124.0m coming from Factoring, Lending & Credit Management, €41.1m from Securities Services, €45.7m from Payments, and €64.2m from Corporate Center (including synergies). Total Adjusted operating expenditures, including D&A, were -€121.0m, and Adjusted LLPs and provisions for risks and charges were -€3.8m .
The resulting Adjusted Profit before Tax was €150.2m and Adjusted Net Profit was €105.4m (+33% YoY), while 9M22 Reported Net Profit was €93.0m (for details on adjustments see footnote n° 4).
Regarding the business units’ KPIs and adjusted Profit & Loss data, as of 30th September 2022, please refer to the “9M 2022 Results” presentation published in the Investors > Results > Financial results section of BFF Group’s website. Please note that the Corporate Center comprises all the revenues and costs not directly allocated to the three core business units, including the synergies from the acquisition of DEPObank (Factoring, Lending & Credit Management, Securities Services and Payments).
CONSOLIDATED BALANCE SHEET DATA
As of 30th September 2022, the consolidated Balance Sheet amounted to €13.0bn up by €2.0bn, +18% vs. 30th September 2021. With respect to Total Assets, at the end of September 2022 the Loan Book was at €4,760m (please refer also to footnote n° 1), at historical hights, up by €1.3bn YoY (+37% YoY, at €3,467m as of 30th September 2021), with strong performance of Italy, up by +56% YoY.
At the end of September 2022, the Government bond portfolio was classified entirely as Held to Collect or “HTC”. The bond portfolio amounts to €6.7bn at the end of Sept-22, vs. €5.6bn at the end of 9M21, with €4.0bn floating rate bonds, and €2.8bn fixed rate bonds, following a rebalancing portfolio strategy, aimed at increasing floaters to benefit from raising interest rates. Fixed bond duration was 24 months, with a yield of 0.22%; floater bond duration was 55 months, with a spread +0.83% and a projected yield of 2.64% vs. 6-month Euribor as of 30-Sept-22. In mid-October about 80% of the floater portfolio has refixed, and about 17% will refix by the year end. Approx. €1.2bn of securities expire in 4Q22, out of which €0.7bn have already expired on 1-Nov-22.
Cash and Cash Balances were €0.2bn as of 30th September 2022, down by €0.1bn (-31.5%) YoY.
On the Liabilities side, deposits from Transaction Services were €6.5bn at the end of September 2022, down by €1.3bn (-16.6%) YoY, with €0.5bn lower YoY deposit from Arca Fondi SGR S.p.A. (“Arca”). Arca migration to another depositary bank was completed in November 2022, and BFF has consequently put in place a program of operating costs’ reduction.
Other main changes of BFF’s funding sources vs. 9M21 are the following:
- BFF bonds outstanding decreased to €39m, vs. €182m at 9M21 (-79% YoY), due to the maturity of €42m Senior Bonds in June 2022 and to the repayment of the Tier II in March 2022, following the exercise of the call option;
- a €150m perpetual NC 5 AT1 Bond was issued in January 2022, with a fixed rate annual coupon of 5.875% to be paid on a semi-annual basis, allowing for higher capital flexibility, large exposure limit and leverage ratio;
- on-line retail deposits at the end of 9M22 amounted to €585m vs. €368m at the 9M21, up by €218m (+59%) YoY, increasing in Poland and Spain;
- Passive Repos (refinancing operations related to Italian Government Portfolio) increased to €4.8bn at the end of September 2022, from €1.3bn at the end of 9M21, due to higher Loan Book and Government bond portfolio, and lower deposits from transaction services, partially offset by the increase in on-line retail deposits.
The Euro cost of funding was -17bps over 1-month Euribor in 3Q22, vs. +13bps over 1-month Euribor in 2Q22.
BFF does not have European Central Bank “ECB” funding to be refinanced, nor ordinary (OMO) neither extraordinary (ie. PELTRO, TLTRO, etc...).
The Group maintained a strong liquidity position, with Liquidity Coverage Ratio (LCR) at 182.6% as of 30th September 2022. The Net Stable Funding Ratio (NSFR) and the Leverage Ratio, at the same date, were equal to 146.8% and 4.0% respectively.
The Group continues to benefit from a very low exposures towards the private sector. Net non-performing loans (“NPLs”), excluding Italian Municipalities in conservatorship (“in dissesto”), were €7.6m, at 0.2% of net loans (1.8% including Italian Municipalities in conservatorship), with a 69% Coverage ratio, down by €0.9m vs. 9M21 when they were at €8.5m, 0.2% of net loans (2.2% including Italian Municipalities in conservatorship).
Annualized Cost of Risk on loans was 10.6 basis points in 9M22, with an increase vs. the previous periods mostly due to specific provisions on private exposures. Cost of risk was equal to zero at YE21 and in 9M21 due to a release of provisions.
Total net NPLs amounted to €86.0m in 9M22, increased by €13.7m vs. YE21 at €72.2m, and by €6.6m vs. 9M21 at €79.4m, driven mainly by new exposure of Italian Municipalities in conservatorship (which increased to €78.3m in 9M22 from €64.5m at YE21, and from €70.9m in 9M21). It is important noticing that Italian Municipalities in conservatorship are classified as NPLs by regulation, despite BFF is entitled to receive 100% of the principal and late payment interests at the end of the conservatorship process.
At the end of 9M22 net Past Due amounted to €187.1m, compared to €19.4m and €1.3m respectively at YE21 and 9M21, because of more stringent interpretation criteria on the New DoD (please refer also to footnote n° 2) issued by Bank of Italy on 23rd September 2022. BFF Group’s underlying credit risk remains unchanged thanks to almost entire exposure towards Public Administration (91% of Non Performing Exposure). In the context of this new regulatory framework, BFF is studying the development of an internal model for credit risk calculation (AIRB) which could allow lower impacts on past due vs current standard model.
Total Net impaired assets (non-performing, unlikely to pay, and past due) were €286.2m as of 9M22 (€104.1m at YE21, €93.2m at 9M21), 91% of which are towards public sector (80% at YE21 and 79% at 9M21). Net impaired assets net of “dissesti” were €207.9m at the end of 9M22 (vs. €39.6m at YE21 and €22.3m at 9M21).
The Group maintains a strong capital position with a Common Equity Tier 1 (CET1) ratio of 13.8% vs. a SREP of 9.00% (increased from the previous requisite of 7.85% as communicated to the market with the press release of 8th August 2022). Total Capital ratio (TCR) is at 19.3%, well above both the Bank’s TCR target of 15.00%, and the new 12.50% SREP (prior to 8th August 2022, the SREP was 12.05%), with €117m of capital in excess of 15.0% TCR target. Both ratios exclude 3Q22 net profit. Including 3Q22 net profit, CET1 ratio and TCR would be 15.1% and 20.7% respectively. €36.8m of dividends have accrued in 3Q22 (€68.5m of interim dividends already paid in Aug-22).
On 19th October 2022, Bank of Italy, following the conclusion of the administrative process to determine the consolidated minimum requirements for own funds and eligible liabilities (“MREL”), informed that, starting from 1st January 2025, BFF shall comply with a Total Risk Exposure Amount (“TREA”) equal to 21.73% (included the CBR Combined Buffer Requirement of 2.50%) and a Leverage Ratio Exposure (“LRE”) equal to 5.33% (see also the press release of 19th October 2022). Since there is no subordination requirement, senior preferred instruments may be used in case of future needs. The pro forma shortfall in terms of TREA is €64.7m and in terms of LRE is €176.5m based on 9M22 results.
Risk Weighted Assets (RWAs) calculation is based on the Basel Standard Model. 9M22 RWAs were €2.7bn (vs. €2.2bn at YE21 and €2.2bn at 9M21), with a density of 44.5%, vs. 45.0% at YE21 and 43.8% at 9M21. RWAs increased due to higher loan book and higher past due.
BFF did not apply any of the ECB / EBA emergency measure or the European Commission’s banking package for COVID-19.
Significant events after the end of the 9M22 reporting period
Closing of MC3 S.r.l. and launch of BFF TechLab
On 4th October 2022 BFF announced the launch of BFF TechLab, the Group’s technological innovation hub (see also the press release of 4th October 2022). BFF TechLab follows BFF’s acquisition, on 3rd October 2022, of 100% of the share capital of MC3 Informatica S.r.l. (“MC3”), the consulting company which has been supporting BFF in implementing the current core-factoring system and defining many other modern application architectures. Consistent with the growth path outlined by BFF in its 2023 Business Plan, this transaction allows the vertical integration of all MC3’s development activities connected with the management and evolution of the information system of the Group.
Statutory increase in late payment interests from 1/1/2023
Late Payment Interest (“LPI”) are equal to 8%+ spread, plus Central Banks’ refinancing rate, by European Directive (Late Payment Directive n° 2011/7/EU – please for additional details refer also to page 6 of BFF 9M22 Results Presentation). LPI rate refixes every 1°-Jan and 1°-Jul, on the basis of the then level of the Central Banks’ refinancing rate, and is expected to reach 10.5% in Jan-23 (10% is already locked in with the rate increase of 27-Oct-22). From Jan-23, BFF is expected to benefit, on overdue invoices towards the Public Administration (€2.2bn as of 30-Sept-22), from a 2.5% increase in LPI rate (45% of which, 1.1%, will be accounted on an accrual basis).
The European Union Court of Justice Sentence on the right to collect recovery-costs: off-balance sheet reserve of €237m and ~€50m of yearly accruals for BFF
On 20th October 2022, BFF won confirmation from European Union Court of Justice that the late Payment Directive n° 2011/7/EU allows creditors to charge at least €40 per overdue invoice towards the Public Administration, irrespective of the time of delay and amount of the invoice.
Since 2018, BFF did in fact routinely ask to be paid €40 per overdue invoice and has recovered €23.5m so far, mostly through courts, or out-the-court settlements, at a similar rate of recovery of LPIs. These amounts are currently accounted on BFF’s P&L only upon collection and therefore on a cash basis, differently from LPIs (accrued at 45%, which is a level significantly lower than actual collection). In the last 12 months, BFF has accrued c. €50m of rights to recovery-costs on c. 1.2m invoices, while collecting, in the first nine months of 2022, €5.4m. BFF has an off-balance sheet cumulated recovery-costs rights of c. €237m.
Statement of the Financial Reporting Officer
The Financial Reporting Officer Giuseppe Manno, declares, pursuant to paragraph 2 of article 154-bis of the Legislative Decree n° 58/1998 (“Testo Unico della Finanza”), that the accounting information contained in this press release corresponds to the document results, accounting books, and records of the Bank.
The 9M22 consolidated results will be presented today, 10th November 2022, at 3pm CET (2pm WET) during a conference call, that can be followed after registering at this link. The invitation is published in the Investors > Results > Financial results section of BFF Group’s website.