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11 May 2023 - 11:21
BFF Banking Group announces record 1Q23 adjusted consolidated net profit
  • 1Q23 Reported Profit at €48.4m, Adjusted Net Profit at €52.7m +38.1% YoY, best quarter ever. 
  • Strong growth in loan portfolio, at €5.0bn, +30% YoY, a new historical 1Q high.
  • Robust Balance Sheet with stable and diversified funding with no recourse to ECB LT lending facilities. Loan/Deposit ratio at 75%, with net positive inflow of retail deposits in 1Q23.
  • Improved Leverage Ratio, with reduction in Total Assets and increase in loan book YoY. 
  • Strong asset quality with 0.1% Net NPLs/Loans ratio excluding Italian municipalities in conservatorship.
  • Very solid capital position: CET1 ratio at 17.0% and TCR at 22.6%. €205m of excess capital vs. 15% TCR target.
  • c. €0.28 per share already accrued in 1Q23, part of the interim dividend distribution in Aug-23, vs. €0.21 in 1Q22.
  • New medium-term targets to be presented on 29th June during Investor Day.

Milan, 11th May 2023 – Today the Board of Directors of BFF Bank S.p.A. (“BFF” or the “Bank”) approved BFF’s first quarter 2023 consolidated financial accounts.

CONSOLIDATED PROFIT AND LOSS 

1Q23 Adjusted Net Revenues were €111.8m, of which €49.9m coming from Factoring, Lending & Credit Management business unit – driven mainly by the growth in Net Interest Income +22% YoY –, €7.0m from the Securities Services, €15.9m from Payments, and €39.0m from the Corporate Center (including €19.8m of capital gain due to the sale of €600m of floaters’ Government bond portfolio). Total Adjusted operating expenditures, including D&A, were €39.0m, and Adjusted LLPs and provisions for risks and charges were €0.4m.

This resulted in an Adjusted Profit before taxes of €72.4m, and an Adjusted Net Profit of €52.7m, +38.1% YoY. 1Q23 Reported Net Profit was €48.4m (for details, see footnote n° 1).

At the end of 1Q23, the employees at Group level were 818 (vs. 851 at the end of 1Q22), of which:

  • 355 in Factoring & Lending business unit (355 in 1Q22),
  • 149 in Securities Services (181 in 1Q22),
  • 51 in Payments (50 in 1Q22), and
  • 263 in Corporate Center (staff, control functions, finance & administration, technology and processes improvement) vs. 265 in 1Q22.

With regard to the business units’ KPIs and adjusted Profit & Loss data, please refer to the “1Q 2023 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 (Factoring, Lending & Credit Management, Securities Services and Payments).

CONSOLIDATED BALANCE SHEET

As of 31st March 2023, the consolidated Balance Sheet amounted to €11.6bn down by €0.5bn (-3.9%) vs. the end of March 2022, despite the increase in Loan Book YoY.

The Loan Book was at €5,046m , at a new 1Q historical high, up by €1.2bn YoY (+30%), with strong performance of Greece up by 66% YoY and Italy, up by 40% YoY.

At the end of March 2023, the Government bond portfolio was classified entirely as Held to Collect or “HTC”. The bond portfolio amounts to €5.6bn at the end 1Q23, vs. €5.9bn at the end of March 2022, with a strong reduction of fixed bonds –24% of the total portfolio in 1Q23 vs. 50% in 1Q22 –, following a rebalancing portfolio strategy aimed at increasing floaters to benefit from raising interest rates. The fixed bond portfolio residual average life was 43 months, with a yield of 0.53%; the floater bond residual portfolio average life was 73 months, with a spread +0.90% vs. 6-month Euribor and a running yield of 3.00% as of 31st March 2023. More than 90% of the variable-rate bonds reset in April 2023, just after the end of the quarter (6 months refixing). Cash and Cash Balances were €0.2bn as of end of March 2023, down by €0.8bn (-84.0%) YoY.

On the Liabilities side, the main changes vs. end of March 2022 are the following:

  • deposits from Transaction Services were €5.2bn at the end of March 2023, down by €2.4bn YoY (€0.8bn YoY excluding Arca), primarily due to Arca’s exit;
  • on-line retail deposits at end of March 2023 amounted to €1,488m vs. €245m at the end of March 2022, up by €1,243m (>100%) YoY, increasing primarily in Poland and Spain;
  • Passive Repos (refinancing operations related to Italian Government Portfolio) amounted to €3.5bn at the end of March 2023, vs. €2.8bn at end of March 2022, increased due to higher loan book and lower deposits from transaction services, partially offset by the increase in on-line retail deposits, while they decreased by €920m vs. YE22 as a consequence of the reduction of Total Asset;
  • BFF outstanding bonds decreased to €39m, vs. €81m at end of March 2022 (-52% YoY), due to the maturity of €42m Senior Bonds during 2022.

The Euro cost of funding was -53bps over 1-month Euribor in 1Q23, vs. -40bps over 1-month Euribor in 4Q22.
BFF does not have European Central Bank “ECB” LT funding to be refinanced (PELTRO, TLTRO, etc.). 
The Group maintained a strong liquidity position, with Liquidity Coverage Ratio (LCR) at 195.3% as of 31st March 2023. The Net Stable Funding Ratio (NSFR) was 152.6% Leverage Ratio 5.2% improved vs. 4.6% at YE22.

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Asset quality

The Group continues to benefit from a very low exposure towards the private sector. Net non-performing loans (“NPLs”), excluding Italian Municipalities in conservatorship (“in dissesto”), were €6.8m, at 0.1% of net loans, with a stable 74% Coverage ratio vs. YE22 and improved vs. 1Q22 when it was 68%. 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. 
Negligible annualized Cost of Risk at 4.7 basis points at end of March 2023.

At the end of March 2023 net Past Due amounted to €198.3m, increased vs. €185.3m as of YE22 and vs. €33.5m as of end of March 2022. In September 2022 Bank of Italy issued more stringent interpretation criteria on the New DoD (Guidelines on the application of the definition of default under Art. 178 of Regulation (EU) no. 575/2013), determining a step up in Past Due exposure, while leaving unchanged the Group underlying credit risk: 92% of NPE exposure is towards Public Administration in 1Q23.

Total Net impaired assets (non-performing, unlikely to pay, and past due) were €300.7m as of 31st March 2023, vs. €283.8m as of YE22, and €124.2m as of end of March 22, primarily as a consequence of higher Past Due. 

Capital ratios

The Group maintains a strong capital position with a Common Equity Tier 1 (“CET1”) ratio of 17.0% vs. a SREP of 9.0%. The Total Capital ratio (“TCR”) is at 22.6%, well above both the Bank’s TCR target of 15.0%, and the SREP of 12.5%, with €205m of capital in excess of 15.0% TCR target. Both ratios exclude the €52.7m of accrued dividends, which, if included, would bring CET1 ratio and TCR at 19.0% and 24.6% respectively.

The next dividend distribution is scheduled for August 2023, based on an interim dividend paid on the basis of 1H23 adjusted net profit, of which c. €0.28 per share already accrued in 1Q23. The balance of the dividend for the 2023 financial year will take place in April 2024, following the Ordinary Shareholders' Meeting called to approve the financial statements.

Risk Weighted Assets (“RWAs”) calculation is based on the Basel Standard Model. As of end of March 2023 RWAs were €2.7bn, at the same level of YE22, and increased vs. €2.3bn at end of March 2022 due to a higher Loan Portfolio YoY, with a density  of 45%, vs. 42% at YE22 and 44% at end of March 2022.

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Significant events after the end 1Q23 reporting period

Split Payment

On 9-May-23 the Government announced that European Union is in the process of giving the green light for a request of extension to apply the VAT split payment, due to expire on 30-Jun-23. No indication on the timing of the extension has been given. In case of approval, we do not expect impacts on BFF 2023 guidance.

Increase in Late Payment Interest rate

From 1-Jan-23, Eurozone Late Payment Interest (“LPI”) statutory rate increased by 2.5%, to 10.5% from previous 8%. Based on current ECB rates, a further increase to 11.75% will kick-in at the next refixing date (1-Jul-23), already locked-in with the rates’ increase of 4th May 2023. 

Dividend Payment 2022

As announced with the press release dated 14th April 2023, following the resolution of the Shareholders' Meeting of BFF held on 13th April 2023, the balance of the gross dividend per share, equal to €0.419, was paid starting from 26th April 2023, bringing the total gross dividend for the fiscal year 2022 to €0.7898 per share.

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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.

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Earnings call

1Q 2023 consolidated results will be presented today, 11th May, at 15:00 CET (14:00 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.

 

Consolidated Balance Sheet (Values in €)

Consolidated Income Statement  (Values in €)

Consolidated capital adequacy

Asset quality