Banca IFIS S.p.A.: Banca IFIS: the first nine months of 2017 saw positive and constantly improving indicators. Confirmed the Group's profitability targets.

RECLASSIFIED DATA1 

First nine months

1 January-30 September 

 

-Net banking income: 371,3 million Euro (+56,2%) 

-Net profit from financial activities: 391,7 million Euro (+79,5%)  

-Operating costs: 186,2 million Euro (+56,9%)

-Net profit for the period: 149,1 million Euro (+125,0%) 

-Cost of risk towards SMEs (Trade Receivables, Corporate Banking, and Leasing segments): -19bps;

-Ratio of net bad loans to total loans to SMEs: 1,6% (1,2% at 31 December 2016);

-Coverage ratio of gross bad loans to SMEs: 89,3% (92,0% at 31 December 2016); 

-Total Group employees: 1.432 employees (1.323 at 31 December 2016); 

-Common Equity Tier 1 (CET1) : 17,14% (15,82% at 1 January 2017);

-Tier 1 Capital Ratio (T1)2: 17,14% (15,82% at 1 January 2017);

-Total Own Funds Ratio2: 17,14% (15,83% at 1 January 2017).  

 

 

RECLASSIFIED DATA1

Third quarter 

1 July-30 September

 

-Net banking income: 121,3 million Euro (+39,8%) 

-Net profit from financial activities: 123,2 million Euro (+48,4%)

-Operating costs: 63,6 million Euro (+51,7%)

-Net profit for the period: 45,5 million Euro (+67,5%) 

 

Mestre (Venice), 9 November 2017 - The Board of Directors of Banca IFIS met today under the chairmanship of Sebastien Egon Fürstenberg and approved the Group's interim financial report for the first nine months of 2017. 

 

"We acted swiftly and resolutely to position the Bank on sustainable growth paths. The market scenario is challenging, and interest rates at zero are not helping. Competing in this environment requires significant efforts on the part of all the Group's employees", said Giovanni Bossi, Banca IFIS's CEO. "This commitment is present and leverages the skills of the resources across the various businesses, but requires considerable flexibility in tackling new targets as well as repositioning ourselves in the market-all without losing sight of the goals for the period and of the three-year strategic plan. Based on the results achieved, I can say that we respected the roadmap for the merger of the former Interbanca Group which is now a completed process. Now we can focus on growth and development". The CEO added that "we are going to accelerate our digital growth: in the last part of the year, we will launch two portals dedicated to our two types of customers, businesses and households. We are against digital technology as a fad and an end in itself, and we support it when it enables and improves the user's experience in his or her relationship with the Bank.  

 

Highlights (reclassified data1)  

 

-Net banking income1 totalled 371,3 million (237,7 million Euro at 30 September 2016, +56,2%). The positive performance was attributable to a series of factors such as the consolidation of the former Interbanca Group, with the Leasing and Corporate Banking segments making positive contributions. Both reported strong results and benefited from the favourable impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by Interbanca and IFIS Leasing over time. More detailed information for each segment can be found below. The extremely robust performance of Tax Receivables contributed to the growth for the first nine months of the year, whereas the pressure on margins in short-term lending to businesses (Trade Receivables) affected especially medium- and large-sized corporate customers-including those inherited from the former Interbanca Group. As for the NPL Area, the portfolio's sale dynamics in the first nine months of 2017 was less lively compared to the prior-year period. The effective management of existing portfolios resulted in better payment arrangements. At 30 September 2017, net banking income was affected also by the costs incurred to secure funding for the acquisition. During 2017, the Group started rationalising its funding cost structure. 

Specifically:

-at the end of May, it finalised a 300 million Euro senior bond issue with a 3-year maturity on the Irish Stock Exchange;

-halfway through October, it finalised a 400 million Euro Tier 2 bond issue with a 10-year maturity and callable after 5 years on the Irish Stock Exchange;

-on 31 October 2017, it changed interest rates on the rendimax savings account and the contomax current account as well as announced that, as far as retail funding is concerned, effective 1 January 2018 clients will be responsible for stamp duty costs for both the rendimax savings account and the contomax current account;

-optimised the costs of the securitisation transactions launched for the acquisition of the former Interbanca Group, winding some of them down. 

 

-The balance of net impairment losses/reversal was a positive 20,4 million Euro (write-back), compared to a negative 19,5 million Euro in the first nine months of 2016. The cost of the quality of loans to SMEs   amounted to -19bps; as for the Trade Receivables segment, they stood at 14,3 million Euro, compared to 15,2 million Euro at 30 September 2016 (-6,9%). This result testifies to Banca IFIS's ability to lend by carefully assuming credit risk. The Leasing and Tax Receivables segments recognised 4,0 and 0,2 million Euro in impairment losses, respectively, whereas the Corporate Banking segment reported 38,9 million Euro in reversals deriving specifically from two individually significant positions. Concerning net impairment losses on receivables of the NPL Area, totalling 23,1 million Euro (23,6 million Euro at 30 September 2016), they were reclassified to interest receivable and similar income to present more fairly this particular business, for which net impairment losses represent an integral part of the return on the investment.

 

-Operating costs totalled 186,2 million Euro (118,7 million Euro at 30 September 2016, +56,9%). The cost/income ratio stood at 50,1%, compared to 49,9% in the prior-year period. The rise in operating costs was largely attributable to the consolidation of the former Interbanca Group, which added 36,9 million Euro (excluding the contribution from IFIS Factoring, which was merged into Banca IFIS effective 1 January 2017). Personnel expenses amounted to 73,8 million Euro (41,9 million Euro in September 2016, +76,0%). At 31 September 2017, the Group's employees numbered 1.432, compared to 1.323 at 31 December 2016 (+8,3% in the first nine months of 2017). Administrative expenses amounted to 104,1 million Euro, up 47,7% from 70,5 million Euro in the prior-year period. 

 

At 30 September 2017, the Group net profit for the period totalled 149,1 million Euro, up 125,0% from 66,3 million Euro at 30 September 2016. 

 

For a better understanding of the results for the period and the comparative data, please note that, starting from 2017, changes in market interest rates and the bank's funding rates required revising the method to calculate the internal transfer rates, and therefore updating them. To facilitate the comparison of the two reference periods, the 2016 results have been restated according to the 2017 funding approach across all segments.

 

As for the contribution of individual segments to the operating and financial results at 30 September 2017, here below are the highlights: 

 

-Loans to SMEs (including the Trade receivables, Leasing, and Corporate Banking segments) generated 252,9 million Euro in net banking income. Total loans to businesses amounted to 5.067,9 million Euro, compared to 5.233,8 million Euro at 31 December 2016 (-3,2%). The decline was largely the result of the contraction in the trade receivables segment (-11,6%) due to the pressure on margins, especially with medium- and large-sized corporate customers inherited from the former Interbanca Group's portfolio. Meanwhile, the Corporate banking and Leasing segments were up +11,7% and +7,1%, respectively. Specifically, the breakdown of loans to corporate customers was as follows: 15,0% are due from the public sector and 85,0% from the private sector. 

Trade receivables generated 97,6 million Euro in net banking income (101,7 million Euro in the first nine months of 2016, -4,0%); the segment's turnover rose to 8,0 billion Euro (+6,3% from 30 September 2016), with 5.238 corporate customers (+6,2% compared to the prior-year period). The Corporate Banking segment generated 108,8 million Euro in net banking income. This amount included the 79,0 million Euro positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiary Interbanca over time. This largely arose from the positions allocated to Workout & Recovery as well as Structured Finance. The exposure of receivables in the Corporate Banking segment amounted to 1,0 billion Euro (+11,7%). The Leasing segment's net banking income totalled 46,5 million Euro thanks to the positive trend of loans to customers, contributing to the rise in market share, and included the positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiary over time, which amounted to 7,9 million Euro. The nominal amount of the segment's receivables was 1,3 billion Euro.

-The NPL Area1 generated 108,4 million Euro in net banking income, compared to 107,4 million Euro in the prior-year period (+0,9%). This amount included 17,7 million Euro in gains on the sales of portfolios (26,8 million Euro at 30 September 2016). In the first nine months of 2017, the NPL Area acquired portfolios of receivables with a par value of 3,8 billion Euro, bringing the total amount of positions to 1.507.346 for an overall par value of 12,5 billion Euro. 

-Tax Receivables generated 12,0 million Euro in net banking income, up 16,2% from 10,4 million Euro at 30 September 2016. 

-The net banking income of Governance and Services was negative 2,0 million Euro. This was largely because of the lower overall contribution from the government bond portfolio-which in the first nine months of 2016 contributed 12,6 million Euro in interest income-as well as the fact that Banca IFIS incurred, and continues incurring in 2017, significant costs associated with the additional funding for the closing of the acquisition of the former Interbanca Group. 

 

Here below is the breakdown of net non-performing loans concerning loans to SMEs:

-net bad loans amounted to 83,5 million Euro, compared to 65,1 million Euro at the end of 2016 (+28,2%); the net bad-loan ratio was 1,6%, up from 1,2% at 31 December 2016. The coverage ratio stood at 89,3% (92,0% at 31 December 2016).

-the balance of net unlikely to pay was 181,0 million Euro, -12,7% from 207,3 million Euro at the end of 2016; the coverage ratio amounted to 45,4% from 45,9% at 31 December 2016.

-net non-performing past due exposures totalled 154,0 million Euro, compared with 137,4 million Euro in December 2016 (+12,0%). The rise in past due exposures was partly due to the natural increase in such exposures to Italy's Public Administration as well as to new private-sector past due positions concerning individual long standing clients that had never been classified within this category. The coverage ratio of net non-performing past due exposures stood at 3,0% (2,6% at 31 December 2016). 

 

Overall, gross non-performing loans to businesses (including the Trade Receivables, Leasing, and Corporate Banking segments) totalled 1.282,1 million Euro, with 863,5 million Euro in impairment losses and a coverage ratio of 67,4%.

 

At the end of the period, consolidated equity totalled 1.338,7 million Euro, compared to 1.228,6 million Euro (restated amount) at 31 December 20164.

 

The consolidated CET12 , the Tier 1 Capital Ratio (T12) and the Total Own Funds Ratio2 of the Banca IFIS Group alone, excluding the effect of the consolidation of the Parent Company La Scogliera, amounted to 17,14% compared to the restated data at 1 January 2017, equal to 15,82% for the CET1 and T1, and equal to 15,83% for the Total Own Fund Ratio.

 

For more details, see the Consolidated Interim Report at 30 September 2017, available in the "Institutional Investors" section of the official website www.bancaifis.it  

 

Declaration of the Corporate Accounting Reporting Officer

 

Pursuant to Article 154 bis, Paragraph 2 of the Consolidated Law on Finance, the Corporate Accounting Reporting Officer, Mariacristina Taormina, declares that the accounting information contained in this press release corresponds to the accounting records, books and entries.

 

1Net impairment losses on receivables of the NPL Area, totalling 23,1 million Euro at 30 September 2017 compared to 23,6 million Euro at 30 September 2016, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net impairment losses represent an integral part of the return on the investment.

 

2 The reported total own funds ratio refers only to the scope of the Banca IFIS Group, thus excluding the effects of the prudential consolidation in the parent La Scogliera S.p.A. Consolidated own funds, risk-weighted assets and solvency ratios at 30 September 2017 were calculated based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013. Article 19 of the CRR requires to include the unconsolidated holding of the banking Group in prudential consolidation. The CET1 at 30 September 2017 including La Scogliera S.p.A. amounted to 15,65%, compared to 14,80% at 31 December 2016, the Tier 1 Capital Ratio (T1) amounted to 16,01% compared to 15,05% while the Total Own Funds Ratio totalled 16,49% compared to 15,39% at 31 December 2016. Please note that the comparative data at 31 December 2016 was restated to account for the change in the opening balances following the definition of the price paid for the acquisition of the former GE Capital Interbanca Group to the seller.