Half Year 2026 BFF Bank SpA Earnings Call
Speaker #3: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker #3: After today's presentation, there will be the opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone.
Speaker #3: To withdraw your question, please press star, then two. Please note, this event is being recorded. I would like to turn the conference over to Katerina Dela Mora, Head of Investor Relations; Giuseppe Sica, Group CEO; and Luigi Luvelli, Group CFO.
Speaker #3: Please go ahead. Good evening, and good afternoon to those joining us from other time zones. We will start with a presentation by our CEO, Giuseppe Sica, and our new CFO, Luigi Lubelli.
Speaker #3: Followed by Q&A. Let me hand over now to Giuseppe. Thank you, Katerina. Let's start on slide two with the key highlights, which reflect our focus on execution and strategic leveraging.
Speaker #3: This will have to continue in the coming quarters. This focus on execution and the resilience of the bank has enabled us to grow adjusted net profit by 8% versus the first half of 2025.
Speaker #3: Even in what remains, and will continue to be, a challenging environment, our payments and security services business continues to perform well, as you will see in a moment.
Speaker #3: In line with our strategic leveraging, we are managing the factoring and lending business in a very disciplined manner. We must act decisively on calendar provision and have started to do so.
Speaker #3: Notwithstanding the anticipation of calendar provisioning from Q3 to Q2, we have maintained our pro forma capital ratios above regulatory requirements, as we said we would do.
Speaker #3: Finally, while we are pleased with our execution to date, we know that we have to address the effects of future calendar provisioning and are working to do just that.
Speaker #3: This is why we have a number of strategic options under review, which include, but are not limited to, a possible securitization. A fundamental review of the business model is under consideration.
Speaker #3: And of course, this has to be in the interest of all shareholders. Moving to key financial metrics on slide three: BFF continues to be profitable, with ROE for the first half well above 20%.
Speaker #3: Close to 30. The business continues to perform in line with expectations across the board. Net revenues are up 9% year on year, in what has been a complex first half for shareholders and employees alike.
Speaker #3: Adjusted net income is up 8%. Factoring loans are down 5% compared to year-end 2025. This is fully in line with our strategic leveraging and focus on profitability.
Speaker #3: Deposits are down by a similar percentage, allowing for a constant loan-to-deposit ratio, which remains strong. It is not on the slides, as we are simplifying messages, but overall deposits grew versus Q1 2026.
Speaker #3: And finally, our performance CT1 ratio stands at 11.1%. This is up versus year-end, even if we had to face the impact of the Bank of Italy report for almost €30 million and close to €90 million impact from the anticipation of calendar provisioning.
Speaker #3: Let's look at net profit in more detail on slide four. BFF's underlying business performance is resilient and drove an 8% increase in adjusted net profits.
Speaker #3: This is thanks to the robust performance of transaction services, which goes up year on year, continues to invest for growth, and is collecting successes.
Speaker #3: Discipline in the management of factoring and lending, as already mentioned, and lower volumes will continue over time as we address calendar provisioning. Collection focus remains high, and we have also strengthened our collection team.
Speaker #3: And finally, effective cost control. I would also like to point out that our reported net profits would have been up 3% year on year if we exclude the impact of the Bank of Italy inspection report.
Speaker #3: Following slide. Group profit before tax is up 7% demonstrating our ability to maintain profitability in the context of our focus on strategic leveraging. A bit more of detail on the various divisions.
Speaker #3: PBT for Security Services and Payments rose 15% year on year to €27 million. It could have reached €63 million if liquidity had been invested in Italian government bonds.
Speaker #3: This would generate over €100–120 million if annualized. Factoring and lending performance was mainly affected by portfolio de-risking. The de-risking will be apparent as I discuss our net exposure to negative court rulings.
Speaker #3: This has gone down from €240 million at the end of 2025 to €100 million. The corporate center has benefited from improved funding rates, focus on cost, and the DHTC portfolio.
Speaker #3: I'm now going to hand over to Luigi for more detail on the numbers as well as the business performance.
Speaker #2: Thank you, Giuseppe. Good evening, everyone. Firstly, I'm delighted to have joined BFF and to have the pleasure of speaking to you today for the first time about our results.
Speaker #2: If we move to slide six, you can see the benefit of BFF's diversified mix of revenues, which I would like to draw your attention to.
Speaker #2: In H1, 64% of net revenues were generated by activities outside our factoring and lending business, compared to 58% a year ago. This diversified mix allowed us to continue growing net revenues year on year, despite a decrease in factoring and lending as a result of portfolio de-risking, which also resulted in significantly lower exposure to negative court rulings.
Speaker #2: As we already mentioned, the Corporate Center benefits from lower funding costs and larger HTC. In Payments and Security Services, we benefited from higher commission income.
Speaker #2: Let us now move to slide seven, where we show you the net interest income, which was stable compared to the first half of 2025.
Speaker #2: This primarily benefited from an improved spread, which was up 21 basis points compared to a year ago, and offset the effect of a smaller loan book.
Speaker #2: This is a trend that was already observed in the first quarter of this year. The improved spread reflects our increased focus on internal rate of return, even excluding LPIs, as well as on quick collections, which has resulted in lower reschedulings.
Speaker #2: On slide eight, we'll look at fees and commissions. We continue to grow fees and commissions in transaction services, with security services achieving a 15% increase year-on-year.
Speaker #2: Thanks to commercial activity, including the onboarding of 15 new funds. On the payment side, the 4% growth was driven by a good performance of net commission income, and we have a solid Future Pay pipeline.
Speaker #2: We would like to highlight today that, among our new relationships, we have also partnered with Revolut, and we have started rolling out specialized services for them.
Speaker #2: This partnership is supported by a strong pipeline of additional services to be launched over time, and that highlights our ability to attract and support leading neobank and fintech players with tailored capabilities for the Italian market.
Speaker #2: In factoring and lending, fees and commissions related to the servicing of third-party portfolios were broadly stable year on year, underscoring our expertise in this area.
Speaker #2: On slide nine, you can see our disciplined approach to cost management, which has allowed us to reduce our cost-income ratio to 46%, even after inflation and accommodating for our continued investment in transaction services, focusing on system upgrades.
Speaker #2: In factoring and lending, you see an increase in costs, which was related to the review of processes. And now I give the word back to Mr. Sica.
Speaker #1: Thank you, Luigi. Let's look at our commercial performance on slide 10. In security services, both assets under depository and assets under custody grew in the first half of the year.
Speaker #1: The overall reduction in deposits is linked to the rebalancing of the Group liquidity mix. In Payments, commercial activity is picking up, with a significant improvement in deposits in Q2.
Speaker #1: which was up 18%. Finally, in factoring and lending, we've been pursuing a selective approach to loan origination, focusing on quality, profitability, and the risk in actions.
Speaker #1: The business remains highly profitable on an underlying basis, but we will continue to increase our focus on profitability versus volumes and improve operational effectiveness, which is key given the EBA definition of defaults.
Speaker #1: New ways to operate in the business will be needed in order to address the calendar provisioning. Moving to our health to collect Italian government bonds.
Speaker #1: We announced a repositioning of our portfolio on the 28th of July. This included the sale and investment of around €30.1 billion of HTC bonds. It was fully in line with the options set out in our capital conservation plan and only has a marginal impact on recurring profitability.
Speaker #1: The impact was not conservatively included in the previous capital conservation plan. Government bonds represent approximately 40% of our total assets, and this is also to protect the interests of all of our clients in the transaction services division.
Speaker #1: Liquidity remains strong and stable, actually improving versus Q1. This is also reflected in stronger liquidity ratios. In particular, improved NSFAR reflects lower past due. Online deposits growth already observed in Q1 continued in Q2, making up for a slight decrease of €72 million in the transaction services deposits.
Speaker #1: The cost of funding decreased significantly year on year, while the spread was broadly stable. Looking at the customer loan portfolio on slide 13, we already mentioned that diversification is an important contributor to our resilience.
Speaker #1: This is also true for our customer loan portfolio. Driven by our selective approach in origination as well as improved collections, the factory loan book has decreased by 11%.
Speaker #1: Our factoring exposure accounted for less than half of the total loan book in the first half of 2026. It also benefits from geographical diversification, with Italian factoring representing just below a third of the loan book.
Speaker #1: Now, let me move to slide 14 on asset quality. Net impaired loans have decreased 6% in the first six months of this year. The drivers of these results are probably more important: we made significant progress on our net exposure to negative cost rulings in this period, which decreased by 60%, and now stands at €100 million versus €243 million six months ago.
Speaker #1: Net NPLs, let me remind you, mainly represented by Italian conservatorships, are down by 25%. UTP increased due to the impact of the Bank of Italy report on the classification of certain Polish public hospitals.
Speaker #1: The cost of risk at 12 basis points is more than double compared to the first half and reflects a more conservative approach to provisioning. It's still 12 basis points.
Speaker #1: This follows the significant cleanup effected at year-end. Slide 15 shows the quality of our origination, which has allowed us to collect 95% of the 2025 volumes and already 70% of the first half volumes.
Speaker #1: In terms of past due collections, we have collected more than €2 billion in the first half, which corresponds to around €300 million of Common Equity Tier 1.
Speaker #1: As I've already done in Q1, let me give you the details of our calendar provisioning impact on the next slide. As you know, we have anticipated the impact of calendar provisioning from Q3 to Q2 in light of the new EBA Q&A.
Speaker #1: We now have an impact of close to €150 million from calendar provisioning. It's a big number. But as of June 2024, the impact would have been around €400 million.
Speaker #1: We have therefore efficiently introduced the portfolio affected by the calendar and will continue to do so. The new declassification from the Bank of Italy, which we effected at year-end, adds additional burden, of course.
Speaker #1: Now, also LPIs are included in the contagion portfolio and tend to stay on our balance sheet for almost seven years, so they would be fully deducted from capital.
Speaker #1: That is why we are also exploring portfolio transactions, which of course will only happen if done at the right terms. Additionally, in the absence of external activities, Poland drives 35% of the estimated Q4 2027 calendar provisioning. That is why we have put in runoff a small factor in portfolio in the country, which contagies the rest and much larger part of our profitable lending book in the country.
Speaker #1: And we should thus be able to significantly reduce the impact on calendar provisioning. On slide 17, we provide more detail on our Common Equity Tier 1 ratio.
Speaker #1: As you can see, these improved both on a stated and on a pro forma basis. Importantly, our organic capital generation remains very strong at nearly 2 percentage points in six months.
Speaker #1: The combined impact of calendar provisioning and the Bank of Italy report is lower than our organic capital generation. We were affected by the sale of HTC bonds at the end of July, which has allowed us to respect all capital ratios on a pro forma basis, which was not the case at year-end.
Speaker #1: The sale was not included, as I already said, in our baseline projections on which our going concern status was based at year end. A few additional points from slide 18.
Speaker #1: RWAs are down €500 million since year-end. RWA density has also gone down. Capital is up compared to year-end. And we respect all capital ratios on a pro forma basis, including MRL.
Speaker #1: Before we start the Q&A, I would like to summarize the key takeaways from this set of results on slide 19. BFF continues to achieve adjusted net profit growth thanks to its focus on execution.
Speaker #1: The transaction services business is performing well. In line with the risk management program, the factoring and lending business is managed in a disciplined manner.
Speaker #1: The pro forma capital ratios remain above regulatory requirements. And finally, the review of strategic options is ongoing. Thanks for your attention. We will now start the Q&A. To ensure that we can take everyone's questions, we kindly ask you to limit yourself to three questions.
Speaker #2: We will now begin the question-and-answer session. To ask a question, you may press star, then one, on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker #2: To withdraw your question, please press star then two. The first question comes from Tomaso Niedu with Kepler Chevreux. Please go ahead.
Speaker #1: Hello, and thank you very much for taking my questions. The first one is on the calendar provisioning. You have described, indeed, the calendar provisioning H1 impact as a phasing shift from Q3 into H1. And so, since calendar provisioning is a mechanical function of vintage aging, I was hoping you could quantify what you expect from these same vintages in 2027. What guidance can you give today on the size and timing of those steps?
Speaker #1: I understand from the press release that it should still allow you to be compliant with the requirements, but more information would be very helpful.
Speaker #1: The second question is on the securitization. There has been no update on the timing, so would you still expect it to close for Q3 2026? And is investor engagement on the junior and mezz tranches still active?
Speaker #1: The third question is on the press speculating on a potential split of the group. Separately, today you have disclosed that the board has received preliminary non-binding expressions of interest from domestic and international parties.
Speaker #1: So, can you clarify whether a full or partial breakup of them is one of the structures under active consideration, or whether the expressions of interest received relate to the group as a whole?
Speaker #1: Thank you a lot.
Speaker #3: Thank you, Tomaso. I'll try to answer to the best of what I can say today. In terms of calendar provisioning, we don't explicitly say that we respect all capital ratios in 2027.
Speaker #3: The number we have today, I expect to go down in the next couple of quarters as we collect part of what was reclassified in June 2024.
Speaker #3: And let me remind you, in the first half of the year... Can you hear me? Okay.
Speaker #1: Yeah, yeah. Now I can hear you.
Speaker #3: Sorry, sorry, I had a problem. Tomaso, I don't know, I will not repeat, but if I skip any of the points, let me know.
Speaker #3: So, what I was saying is we have already offset the first wave of calendar provisioning impact and the impact of €30 million from the Bank of Italy inspection report with our first-half earnings.
Speaker #3: And the leveraging—so this, as much as I would say, again, there should be an improvement over the next couple of quarters because of the collections we are making. As you have seen, we have gone from 400 to 140 in six quarters.
Speaker #3: On the securitization, of course, once there are updates to be given to the market, we will give updates to the market. We are working along the lines which I've mentioned on previous calls.
Speaker #3: There is no point for me to add to that. The securitization needs to be done at terms which are fair and create capital for the bank.
Speaker #3: The board is not working on a split of the group. And so we will have to analyze the various options that the bank has at its disposal.
Speaker #1: Okay. Thank you a lot.
Speaker #2: The next question comes from Giovanni Razzoli with Deutsche Bank. Please go ahead.
Speaker #3: Good afternoon, everybody. I have a couple of questions. One is a clarification on slide number 16. So, the €141 million of calendar provisioning impact is the one in the second quarter of 2026?
Speaker #3: Is it the one that is embedded in your CET1 ratio as of now, following the anticipation of the decision of the Bank of Italy to bring forward in the second quarter the impact of the calendar provision?
Speaker #3: So that is my first question. And the second question is if this €141 million is the one that is embedded in your CET1 ratio, and as we know that the calendar provision mechanically increases the coverage from 35% to 100% after another one year of vintage, is it fair to assume that the second quarter of 2027 is another relevant cutoff for another potential significant impact of the calendar provision, all else being equal?
Speaker #3: So, assuming that there are no collection or other managerial actions, just to have an understanding, on a static basis, what would be the impact on your CET1 ratio?
Speaker #3: And another question can you explain can you provide more details about the downsizing downsizing sorry of the polish factoring product so you mentioned that you are selling a small portfolio which is providing a significant impact in terms of contaging is my understanding correct.
Speaker #3: Thank you.
Speaker #1: Thank you Giovanni.
Speaker #3: Yes, the €141 million is what has already been deducted from our capital as of June 2026. However, as you know, we already had around €50 million of calendar provisioning in the past.
Speaker #3: So it's not all from the reclassification. I think the one from the reclassification, which we quoted in the previous press release, was around €85 million, and you're good with numbers.
Speaker #3: So, you can work out what the 65% would be. However, as I already said to Tomaso, we offset the 85 and the impact of the Bank of Italy inspection report with one semester of earnings.
Speaker #3: And to do the initial numbers of the mathematical numbers, I would assume no collections, but we are collecting, and that's why we show what was the impact as of June 2024 and what is the actual impact.
Speaker #3: Okay. So I would say you can run the numbers. You should certainly account for a reduction of the overall impact because of collections and other measures that we are taking.
Speaker #3: On Poland—sorry, I was not very clear. So, we have a small book; it's around €100 million of factoring-like products, and this factoring is often beyond 180 days. Because of the letter which we received in March from the Bank of Italy, it was classified as past due.
Speaker #3: Which was not the case before, because it was a non-notification factoring. So, by running off or deleveraging—I didn’t talk about disposal—but by deleveraging and reducing this €100 million, the level of contagion on the lending book of Poland would reduce dramatically.
Speaker #3: And so, we would expect a significant number of our lending book in Poland to go back from past due to performing. Which makes sense, because our hospitals continue to pay us regularly, other than for this small factoring portfolio.
Speaker #1: Basically, to make it clear, you are doing what I guess you are not in the condition to do now in Italy, because the amount of contagion exposure also is much higher when compared to the contagion exposure, no?
Speaker #3: Yes. In Italy and in Poland, we collect this factoring on average in two years. So we can run it down quickly, and above all, the component of LPI is very small.
Speaker #3: In Italy, the impact of the LPI after the reclassification of March is much more important, and so we cannot collect this contingent exposure in Italy that quickly.
Speaker #1: Okay. And just a very, very quick follow-up. Thank you for your clarification. Again, back on that slide, I would assume that the decrease from €400 million to €141 million—does this impact also reflect the effect of Poland, or is this something that we will see in the future?
Speaker #3: No, it will be seen in the future. This was a decision that was taken, in fact, after the 30th of June.
Speaker #1: Okay. Thank you.
Speaker #2: The next question comes from Manuela Meroni with Intesa Sanpaolo. Please go ahead.
Speaker #4: Good evening, and thank you for taking my questions. The first one is on calendar provisioning. You said to expect to respect the capital ratios in 2027.
Speaker #4: What about 2028? Do you have some updated expectations on 2028? The second question is on the strategic options that you mentioned on top of the circuitizations.
Speaker #4: I'm wondering if you can please elaborate a little bit more on what you are working on. And the third question is on the impact of the disposal of the government bond portfolio you made in the second quarter of this year.
Speaker #4: What will be the contribution of the government bond portfolio in 2000 in the second half of 2026, and more generally, if you can confirm your guidance in terms of net income for 2026?
Speaker #4: Thank you.
Speaker #3: Okay, so on the impact—I'll go backwards. On the impact of the bond portfolio on the overall profitability, I don't think I can give you a number, but it's less than a handful of million on a running rate basis.
Speaker #3: As you know, we have around €1 billion of bonds, which yield 0.6% fixed, that are going to expire in 2027. So, we will largely more than offset the impact of this slightly lower net income.
Speaker #3: We have not, we have not updated our estimates for the year. You have seen how much we have delivered in the first half of the year.
Speaker #3: On the securitization, I'm afraid I can't give you much more detail than what I've said before. I like to talk about things once I've done them. You know, I've indicated what is the timing we are currently working towards.
Speaker #3: The calendar provisioning—yeah, we said we respect the ratios in 2026. We said we respect the ratios in 2027. In the context of the annual report, we said we had a small breach in 2028.
Speaker #3: Now, because of the anticipation of the calendar provisioning, one may have thought that we would have a breach in 2027. We don't, and we don't because we have started to take actions, and these actions are precisely the sale of the HTC bond portfolio, which was not there.
Speaker #3: The leveraging that I discussed a few moments ago with Giovanni on Poland—and because the bank remains profitable—on 2028, we have a potential small capital breach. That is on the assumption that we don't do any of the actions which are in our capital conservation plan.
Speaker #3: There is some disclosure in the press release about what these actions are. And I think we have many options that we can evaluate; we don't need to do all of them.
Speaker #3: So I'm not too concerned about our capital ratios in 2028. What is important for me to stress and I take yeah your question. As an excuse to that that we all have to understand that yes we can manage the calendar we can address the capital ratios but we have to rethink the way we do the factoring part of the business.
Speaker #3: To be able to generate more capital in the future.
Speaker #4: Thank you.
Speaker #2: The next question comes from Michael Nidzisky with Roche Capital. Please go ahead.
Speaker #1: Yeah. Hi everyone. One question for me can we rule out a capital raise an equity raise at this stage? I mean you you you've managed to you know protect your your your capital tier one ratio you know despite a number of headwinds.
Speaker #1: And it looks like it's going to, you know, be on an upward trajectory from here. So, is it fair to say that a capital raise is not an option at this stage?
Speaker #1: Thank you.
Speaker #3: Thank you for the same question I got asked at the end, and probably also in the first quarter. I said that we are not working on a capital raise.
Speaker #3: We're not working on a capital raise because, at the moment, we don't need capital. But for the more fundamental reason that I said before to Manuela is, we need to rethink the business model of the bank in factoring.
Speaker #3: To be profitable and to generate capital—this is the prerequisite of anything that we are working on. Frankly, it is the target for anything that we are working on.
Speaker #1: Okay. Thank you.
Speaker #2: The next question comes from David De Giuliano with Equita. Please go ahead.
Speaker #3: Hi, good evening, and thank you for taking my question. I have three. The first one is on the depository bank. Can you give us some color on the reasons why depository assets are declining quarter-on-quarter, and also the evolution of deposits both in depot and the payment business? In particular, we see a sequential decline in depot and a good increase in the payment business.
Speaker #3: So if you could provide us more color would be helpful. The second one on loan loss provision. Can you comment on the right banks if I'm not mistaken in the factoring and lending division and on the adjusted loan loss provision in the adjustment column which seems higher than those required by the Bank of Italy and the last one on NII evolution.
Speaker #3: Can you explain better the decline in NII in the factoring and lending division which if I'm not mistaken went from 65 million in Q1 to 41 million in Q2.
Speaker #3: How much is the associated provision release and just a quick clarification on the slide you stated that IRR excluding LPIs is 6% compared to 9% including LPIs.
Speaker #3: Is it correct to say that one third of interesting income derives from the accrual of LPIs LPI LPIs sorry. Thank you.
Speaker #1: Thank you David. On let me say again we are very pleased with the execution of the transaction services both depot bank and payment. Depot bank lost one client in the second quarter.
Speaker #1: This client communicated to us around two years ago, so before anything bad happened to BFF, that they would leave the company and they went somewhere else.
Speaker #1: So that drives the decrease in deposits of the depository bank. At the same time, we have had many onboardings, and frankly, we have had more—we have had more in July, probably one important one yesterday.
Speaker #1: So that was to be expected on payments and EPI, that you noticed the increase of the deposits of the payments, because I said on the previous call that the decrease we had in the first quarter of the year was driven by a single counterpart that had gone out.
Speaker #1: So we have normalized that, and it's under control. The profitability of the factoring and lending—I think the profitability of factoring and lending and the lower net interest income—has been driven by a few factors.
Speaker #1: One has been the reduction in the loan book and that's even more than offsetting for then even more than offset by the the better pricing on the front book but overall the impact remains negative.
Speaker #1: The other thing is the risk that we have taken in factoring and lending with regards to negative sentences. So, that has an impact also on the net interest income, which you have seen there. I think it will be much lower in the following quarters.
Speaker #1: Yes, and part of the releasing provision is precisely related to the retrocessions that we have been doing, which is that the negative impact on part of the revenues of the factoring and lending—we have associated those provisions to partially offset those increased revenues.
Speaker #1: On the LPI the 6% is a good number. It's not good enough and we want to do better. But to have a business that yields 6% with the public administration as counterpart excluding LPI is not a bad business proposition.
Speaker #1: I don't think you can or should assume that the net interest income is two-thirds maturity commissions and, sorry, two-thirds maturity commissions and one-third LPI.
Speaker #1: That's for a variety of of reasons is because the LPI also impacts negatively our interest income for the scheduling but also the impact of the backbook is not negligible.
Speaker #1: On the other hand, we do collect LPIs. So, the reason why we give this number here is precisely to stress what I think was embedded in your question, which is: probably the market is overstating the importance of LPI in our net interest income.
Speaker #1: I hope I have.
Speaker #3: Yeah. Yeah. Thank you. No. No. Thank you. Very clear.
Speaker #2: The next question comes from Sharada Patel with CT. Please go ahead.
Speaker #4: Hi, thank you for taking my questions. I have three. So, the first one—just coming back on the deposits, I know you've had a number of inflows.
Speaker #4: Have any other depositors started or set their intention to exit started the process of of outflows and is there any risk around your deposit rating anything that might be kind of contractual and then my second question is on the capital conservation plan you point to potential issuance of tier two and senior.
Speaker #4: Have you sounded out investors already and how do you view the current market conditions and then my last question is could you just explain a bit more detail when you point to the potential valorization of assets.
Speaker #4: Thank you.
Speaker #1: No, thank you. Thank you for the questions. I think on deposits I've said probably most of the things to be said. We had this one client which communicated to the bank two years ago that they wanted to exit.
Speaker #1: Some clients have gone out. Some clients have come in, and more are coming in July and August. So that's good in the depository bank.
Speaker #1: On the contractual exit rating, it is a topic which does not get too much of my attention in the sense that the clients are always, or almost always.
Speaker #1: Free to leave. And they have not left. And when they communicated, which I talked about a few moments ago, it takes a relatively long time. But anyways, we are not—we are not seeing that.
Speaker #1: On the issuance of bonds, I think we are now leaving for the holidays. I hope to take a bit of holidays now. We'll see what happens when we come back, or later if we want to wait.
Speaker #1: You also asked a question about valorization of assets. I think I mentioned that, apart from securitization, we may also consider small disposals if done at the right terms for the firm.
Speaker #4: Thank you.
Speaker #2: The next question comes from Stéphane Souchet with Bank of America. Please go ahead.
Speaker #1: Thank you for taking my my question. Three questions at my end. Follow up on calendar provisioning. If I triangulate this 85 million euros of calendar provisioning for for Q2 to get to 100% coverage you would suggest an extra calendar provisioning in Q2 next year of of 200 million euros.
Speaker #1: So, is it fair to assume that you expect most of this headwind to be mitigated by effective collection and the strong organic capital generation of the bank?
Speaker #1: Secondly, you mentioned you need to rethink the bank; you need to rethink the factoring business. Could you expand on what that means?
Speaker #1: Does it entail, for instance, more regular usage of securitization, for instance? And lastly, in terms of issuance—sorry, I understand, obviously, we go into the holiday season—but how do you think about your Emerald ratio in the context of the bond due for call next year, the senior preferred bond due for call next year in March, more precisely? How do you approach, how do you think about this refinancing?
Speaker #1: Thank you very much.
Speaker #3: Oh. Thank you, Stéphane, for your question. So, I don't want to run into a debate about math, but if 85 is 35%, then 65 is not 200 million—it's much less.
Speaker #3: Second, that assumes that we do no collection—and we do collect. That's why we showed the slides going from 400 to 140. On the bonds, you know, I don't like to be at the level of capital I am now.
Speaker #3: We want to be higher, and that's why we are working on the options we are working on. There was another question—sorry, Stéphane—which I missed. If you could repeat that for me.
Speaker #1: Yeah, of course, Mr. Souchet. So, my last question was really around the factoring business. You suggested the bank needs to rethink the factoring business, and I'd just like to know if you could expand on what that means, effectively.
Speaker #1: Thank you.
Speaker #3: Yes, I think the key issue of our business model is very simple. Given the reclassification of March, which is the fact that LPI stays on our balance sheet for 2,400 days on average.
Speaker #3: And that means that they will, by definition, go in calendar and they continue to generate a high level of past due. That's the part we need to deal with.
Speaker #3: What is the best way to deal with you know could be a recurring securitization could be a partner to buy forward flows of LPI when they become past due.
Speaker #3: These are the kind of ideas which I remind among the others. We don't have to rush. We have to find the best one for BFF.
Speaker #3: And we don't have to rush.
Speaker #1: Okay.
Speaker #3: Because we don't have to rush because I think our calendar provisioning is not above 200 million and that that excludes any capital generation and the leveraging that we can do with little arm to the business.
Speaker #1: All right. Thank you, Mr. Sica. Very clear.
Speaker #2: The next question.
Speaker #3: Yeah. Okay.
Speaker #2: Sorry. The next question comes from Domenico Maggio with Jefferies. Please go ahead.
Speaker #5: Hello, good evening. So, I have three questions. You mentioned the potential sale of a Tier 2. I was wondering, at what level does the Tier 2 work on your side?
Speaker #5: I mean, I guess there is a ceiling above which you wouldn't want to go, just roughly speaking. The second question is: does the sale and the acquisition of the HTC bond portfolio mean there is going to be a mark-to-market of this portfolio on capital going forward?
Speaker #5: Sorry to come back to the calendar provisioning, but don't you have an impact from the €1.3 billion reclassified at full year '25, which supposedly—from the EBA Q&A—should come two years after?
Speaker #5: So I would have thought that Q4 '27, basically you have to provision to bring provisioning at 35% on those €1.3 billion. Yeah. Those are my three questions.
Speaker #3: Thank you, Domenico. The tier two—no, I don't have a level in mind, but whatever level investors are reminded is too expensive for me.
Speaker #3: So we would like to find a middle point. On the HTC mark-to-market, no, I don't see that risk. There is no level above which that becomes mark-to-market.
Speaker #3: On the calendar, yes. You know, I think somebody at the very beginning of the call asked me, "What are your projections?" And we don't give the projections. Of course, that would have to go into calendar. Now, the 1.3 is your number at the moment of the reclassification. That number, if that is right, is down by many, many hundreds of millions already—already now.
Speaker #3: And as I said during answers, 35% of that number is coming from Poland, which we can manage relatively quickly. I don't want to make things look easy, because I know things are not easy.
Speaker #3: There is a part that we can solve more quickly, and there is a part like the LPI on which we have to study the solution. But absolutely, there will be an impact from reclassification—it's in our numbers—and we don't see capital breaches in 2027.
Speaker #5: Okay. Just coming back on the HTC portfolio. Why exactly there is no I mean I thought that the the action basically triggered a different classification and therefore the mark to market to capital.
Speaker #3: We would have, we would have. We would have, we would have said so in the press release.
Speaker #5: Okay. Thank you.
Speaker #3: Thank you.
Speaker #2: As a reminder.
Speaker #3: Okay, so I think—okay. Sorry, I thought it was done.
Speaker #2: As a reminder if you have a question please press star then one. Mr. Sico back to you for any closing remarks. We don't have any other questions registered.
Speaker #3: Thank you. Thanks to all the participants and thanks for all the questions and I look forward to speaking again soon in the context of our nine months results or earlier in the various roadshow that we keep doing and you are always happy to see investors.
Speaker #3: Thank you.
Speaker #2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.
