Banca Sistema S.p.A. · MIL:BST
Banca Sistema — Q1 2019 Earnings Presentation
39 slides from Banca Sistema's earnings presentation, May 31, 2019
Slide 1: Group Profile May 2019
BANCA SISTEMA SPECIALTY FINANCE GROUP PROFILE May 2019
Slide 2: Agenda
Agenda I. Overview of Banca Sistema II. 1Q 2019 Results III. 2018 – 2020 Strategic Plan Annexes 2
Slide 3: I. Overview of Banca Sistema
I. Overview of Banca Sistema
Slide 4: What we do
Among the top Italian specialty finance What we do 1Q 2019 1Q 2019 Total customer loans1 Total Funding €2,497m €3,596m Other Salary and 4% Wholesale Pension secured 49% loans (CQS/CQP) 28% Retail 51% Factoring to PA 68% Note: 1. Total Customer loans represent the item of the Balance Sheet, “Assets a
Slide 5: Snapshot
Snapshot Shareholders Structure Key strengths • Shareholders’ agreement between Strong competitive position with two banking Foundations Strong analytical capabilities opportunities to consolidate the (“Fondazioni”) and SGBS (of which leadership Market1 the relative majority shareholder is 61.6% Sha
Slide 6: Factoring: attractive market driven by PA payment delays
FACTORING Delay and PA spending are the drivers of this attractive Market Average PA payment times In Europe (days)2 Italy is characterized by structurally high Public 104 Administration payment times compared to 78 103 95 73 other European countries 57 55 56 33 26 23 22 As at 31.12.2017 estimated T
Slide 7: Factoring: supporting corporates in dealings with PAs
FACTORING Supporting corporate entities in their business dealings with PAs PA Suppliers (Banca Sistema Clients) PA Obligors Local Entities (regions and municipalities) Leading multinationals and corporates Main Sectors: • Utilities Local Healthcare Organizations (“ASLs”) • Healthcare • Services • F
Slide 8: Factoring business leverages a well balanced network
FACTORING Factoring business leverage on a well balanced network DIRECT CHANNEL INDIRECT CHANNEL • 15 Origination resources 19 commercial agreements to provide factoring products to • 7 Relationship Managers third party banks in Italy, through c. 1,500 branches Offices Milan North 10 50% Rome Centre
Slide 9: Factoring Business: Key Dates for Pricing and Collection
FACTORING Factoring Business Overview of Key Dates for Pricing and Collection Collection Dates and Contribution Margin Receivables Factoring - Key Dates Overview Illustrative 0 Date of Invoice • Date of original invoice Collection Date Days Sales Outstanding (DSO) of the receivable Days 0 1 2 3 4 5
Slide 10: BST: Factoring outstanding
FACTORING BST: Factoring outstanding Our Key Strengths Factoring outstanding €m Disciplined underwriting process supported by +22% y/y Of which 22% under Legal action accelerated collections without relying on active LPI +6% q/q Strong collection, up till 30 days before the ECD analytical Proprietar
Slide 11: Italian CQS/CQP market: Low risk business
CQS/CQP Italian CQS/CQP market: Low risk Business Key product items Outstanding as at 31.12.20181 • A product established by the law of the 1950s • The borrower’s loan is repaid directly from their Private €18bn salary/pension, by the employer/INPS (Italian 18% +7% y/y pension institution) • Monthly
Slide 12: BST: CQS/CQP outstanding
CQS/CQP BST: CQS/CQP outstanding Our Business model CQS/CQP Loans outstanding €m Agreement with 5 originators +35% y/y Acquisition of Atlantide (an originator), to be +9% q/q Commercial capabilities merged by 652 708 Lower exposure to the Private component vs the 526 Market A good portion of the ass
Slide 13: II. 1Q 2019 Results
II. 1Q 2019 Results
Slide 14: 1Q 2019 Results at a Glance
1Q 2019 Results at a Glance Factoring Turnover +27% y/y equal to €639m Commercial Tax receivables represent 23% of 1Q 2019 factoring outstanding performance CQS/CQP outstanding reached €708m, +35% y/y Interest Income equal to €21.6m, +8% y/y Cost of funding lower y/y at 0.8% Total Income equal to €1
Slide 15: Core business assets outstanding is growing
Core business assets outstanding is growing Factoring outstanding CQ Loans outstanding €m €m +22% y/y Of which 22% under +35% y/y Legal action +6% q/q +9% q/q 1,820 652 708 1,716 1,488 526 31.03.2018 31.12.2018 31.03.2019 31.03.2018 31.12.2018 31.03.2019 Outstanding breakdown (31.03.2019) Outstandin
Slide 16: 1Q 2019 – Balance Sheet
1Q 2019 – Balance Sheet Figures in millions of Euro 31.12.2018 31.03.2019 Change in % Govies’ portfolio (€1,233m) up q/q and y/y, with an average residual ASSETS duration of 14 months (21 months Financi al a s s ets at fair va lue through P&L [Held to Sell] - 262 nm as at 31.12.2018), includes €262m
Slide 17: 1Q 2019 – Income Statement
1Q 2019 – Income Statement Figures in millions of Euro 31.03.2018 31.03.2019 Change in % Interes t i ncome 20.0 21.6 8% Interes t expens es (6.4) (7.0) 10% Net interest income 13.7 14.7 7% Net fee a nd commi s s i on i ncome 3.6 4.0 12% Di vi dends a nd s i mi l a r i ncome - - Net i ncome from tra
Slide 18: Interest Income growth driven by higher assets
Interest Income growth driven by higher assets Total Interest Income Adjusted Income margin1 €m 1Q 2019 Interest Income is up 8% y/y, growth is driven by higher assets, in +8% particular CQ and Govies’ ptf y/y 21.6 20.0 5.1% 4.4% Factoring represents 68% of Total 6.9 1Q 2018 1Q 2019 5.0 Interest Inc
Slide 19: Total Income supported by business growth
Total Income supported by business growth Total Income 1Q 2019 Total Income is up 7% y/y, €m growth is driven by higher Net Interest Income (NII) and higher Net +7% 19.3 18.1 y/y 0.6 Commissions 0.9 4.0 3.6 NII y/y increase is driven by Interest Income increase that has more than compensated higher
Slide 20: Operating costs up y/y for business growth
Operating costs up y/y for business growth Administrative Expenses, Net Provisions for Operating Costs Personnel Expenses risk, Servicing Costs, Other and D&A €m FTEs (#) 169 182 +9% y/y 10.8 As of today total FTE equal to 209 9.9 following the acquisition in April 2019 of Atlantide 5.9 4.9 5.1 4.8
Slide 21: Lower funding cost y/y
Lower funding cost y/y Total Funding breakdown Total Funding breakdown Funding Cost1 • Cost of funding lower y/y 1.0% 0.9% 0.9% 0.8% and slightly lower vs FY 59% 2018 Wholesale 52% 51% Retail 43% • Wholesale q/q increase is Funding 49% Funding due mainly to Repos 51% 25% related to the increase q/q
Slide 22: Asset Quality driven by factoring business
Asset Quality driven by factoring business Gross Non Performing Exposures Net Non Performing Exposures €m 225.2 230.3 196.0 198.0 189.1 57.5 55.9 161.5 39.0 36.9 60.6 40.8 77.9 89.5 87.2 98.2 24.3 31.3 97.3 96.4 80.5 76.2 79.1 74.5 30.09.2018 31.12.2018 31.03.2019 30.09.2018 31.12.2018 31.03.2019 Pa
Slide 23: Regulatory Capital well above minimum requirements
Regulatory Capital well above minimun requirements CET1 and Total Capital(1) RWA breakdown €m CET1 Total Capital €m Operational Risk & Market Risk (2) Credit Risk TC Ratio 13.7% 13.2% 15.2% Lower CQ CET1 Ratio 11.0% 10.6% RWA 12.2% 1,400.7 184.5 1,317.0 181.1 144.3 148.3 2019 SREP requirements: 1,23
Slide 24: III. 2018 – 2020 Strategic Plan
III. 2018 – 2020 Strategic Plan
Slide 25: Delivering sector leading profitability in 2017
DELIVERING SECTOR LEADING PROFITABILITY IN 2017… …OUR 2017 FINANCIAL PERFORMANCE AT A GLANCE… €87.2m Interest Income €26.8m 22% +12% Adjusted Interest Income Margin ~550bps1 Net Income Return on Average Equity Factoring customers (YoY) including factoring commission income 630bps 11.9% CET1 Ratio €0
Slide 26: A strategy facilitating tailor-made, innovative solutions to customers
A STRATEGY FACILITATING DELIVERY OF TAILOR-MADE, INNOVATIVE SOLUTIONS TO CUSTOMERS …CONTINUING TO BUILD ON STRONG FOUNDATIONS IN OUR CORE BUSINESS WHILST DEVELOPING NEW REVENUE STREAMS IN LINE WITH BANCA SISTEMA’S OVERALL RISK APPETITE…. Not in Plan Divisional Business Model Ancillary Core business
Slide 27: A divisional model to drive our business momentum
A DIVISIONAL MODEL TO DRIVE OUR BUSINESS MOMENTUM …SUPPORTING EFFICIENT EXECUTION OF OUR STRATEGY… Facilitate benchmarking against the Transparency market Optimise cost allocation based on target Cost revenue for each business division allocation Driving Execute profitability of each business profit
Slide 28: Shaping our factoring business for further success
SHAPING OUR FACTORING BUSINESS FOR FURTHER SUCCESS KEY TRENDS IN FACTORING A FAVOURABLE MARKET BACKDROP FOR FACTORING… SHAPING THE STRATEGIC CONTEXT…. Operating in an environment with The extension of the Italian VAT rising interest rates - larger clients “Split Payment” regime is expected expected
Slide 29: Exploiting the potential of our CQS/CQP consumer finance business
EXPLOITING THE POTENTIAL OF OUR CQS/CQP CONSUMER FINANCE BUSINESS… • Further consolidate growth of our CQS/CQP business into a parallel core business line • Further expand our position and leadership in a niche market with low risk and high returns • To develop the Bank’s commercial network and expl
Slide 30: Seeking new opportunities to diversify
SEEKING NEW OPPORTUNITIES TO DIVERSIFY… …TO DIFFERENTIATE AND FURTHER ADVANCE OUR BUSINESS… Over the years, Banca Sistema has diversified its business model by exploring opportunities in adjacent and complementary sectors that offer the same combination of high yield and low risk as seen in its core
Slide 31: Maintaining asset quality, funding and cost efficiency
MAINTAINING ASSET QUALITY, FUNDING AND COST EFFICIENCY • Continue geographic diversification 2020 Total Funds Total funding costs within the retail customer base broadly stable (term deposits) when efficient FUNDING Wholesale • Funding mix based on asset 52% duration Retail 48% ~1% • • Take market o
Slide 32: And achieving our financial targets
AND ACHIEVING OUR FINANCIAL TARGETS… CAGR 2017 – 2020 (%) 2020 CAGR 2015 – 2017 (%) 2017 1 Factoring Turnover: ~18% Turnover: €3.3 bn Turnover: 19% Turnover: €2.0 bn Outstanding1: ~28% Outstanding1: €3.0 bn Outstanding1: 13% Outstanding1: €1.4 bn 2 Consumer Finance Outstanding: ~25% Outstanding: €1.
Slide 33: Annexes
Annexes
Slide 34: Factoring Turnover
Factoring Turnover Factoring Turnover €m +27% 639 Turnover generated by agreements with Italian Retail banks: 504 35% in 1Q 2019 408 1Q 2017 1Q 2018 1Q 2019 1Q 2019 Factoring Turnover breakdown By Type By Year of Customer’s Customer Concentration Acquisition Tax receivables 1Q 2019 TOP 10 10% Before
Slide 35: Operating in an attractive, large and growing market
OPERATING IN AN ATTRACTIVE, LARGE AND GROWING MARKET… Payment times in Italy amongst the Italian public spending in line with Gradual recovery in interest rates longest in Europe general Eurozone recovery 2016 Average PA payment times (days) 1 Italia Public Spending (YoY%) 2 Euribor 1M (annual avera
Slide 36: Gold/jewellery back lending in Italy
Gold/jewellery back lending in Italy Italian Market Main Features of the Product in Italy The gold/jewellery back lending in Italy is the institutional • The pawn loan is a particular form of short- pawnbroking business. This business is anticyclical, compared term loan with a collateral on property
Slide 37: Banca Sistema Gold/jewellery back lending
No relevant impact on 2019 P&L Banca Sistema Gold/jewellery back lending BANCA SISTEMA STRATEGY Actual focus on gold, on jewelries, diamonds and some watch brands Product Fast loan procedure Advertising in different languages Offered loan durations: 3/6/12 months First dedicated branch opened in Mil
Slide 38: Disclaimer
Disclaimer The distribution of this presentation in other jurisdictions may be restricted by law or regulation. Accordingly, persons who come into possession of this document should inform themselves of, and observe, these restrictions. To the fullest extent permitted by applicable law, the companie
Slide 39: Head of Investor Relations
Carlo Di Pierro Head of Investor Relations carlo.dipierro@bancasistema.it +39 02 80280358 +39 3355288794