Bff Bank Spa · MIL:BFF
Bff Bank Spa — Debt Investor Presentation (October 2020)
42 slides from Bff Bank Spa's debt investor presentation, October 2020
Slide 1: Fixed Income Roadshow and 1H 2020 results
Fixed Income Roadshow and 1H 2020 results October 2020 A Bank Like No Other® 00
Slide 2: Disclaimer
Disclaimer This presentation may contain written and oral "forward-looking statements", which includes all statements that do not relate solely to historical or current facts and which are therefore inherently uncertain. All forward-looking statements rely on a number or assumptions, expectations, p
Slide 3: Speakers
Speakers Piergiorgio Bicci Chief Financial Officer Caterina Della Mora Director, Group Investor Relations, Strategy and M&A 22
Slide 4: Table of Content
Table of Content 1. Overview 2. 1H 2020 results: beating the virus 3. Funding, capital & asset quality 4. Annexes - DEPObank acquisition - P&L and Balance Sheet summary 33
Slide 5: Executive summary
Executive summary ▪ Solid financial performance, in line with previously communicated projections BFF financial ▪ Improved risk profile and profitability performance ▪ Improved creditworthiness It allows for ▪ business diversification DEPObank ▪ higher liquidity and cheaper funding acquisition ▪ hig
Slide 6: “BFF 2023” – A Leading Specialty Finance Bank Built with Discipline
“BFF 2023” – A Leading Specialty Finance Bank Built with Discipline “BFF 2023” Banking group leader in specialty finance niches in Europe, leveraging on its leadership position Vision in financial services to the suppliers of PA and HC ▪ Operating with honesty and transparency, respecting and valuin
Slide 7: A rock-solid business
A rock-solid business Highly Capital Generating Demonstrated access to Essentially No Credit Model capital markets Losses on Factoring 38% Zero on Public sector €1,250m Adj. Return on Tangible Equity of total bonds issued, of which €5.5m(1) >10% €750m currently outstanding as of cumulated last 13 ye
Slide 8: Built over 35 years of serving HC and PA suppliers
Built over 35 years of serving HC and PA suppliers 1985: Established by 2013: Turning 2016: Acquisition 2017: becomes 2019: acquisition 2020: announced a group of point, becomes a of Magellan BFF Banking of IOS Finance, acquisition of pharmaceutical bank Group and lists on leading PA DEPObank, speci
Slide 9: Three main Business Lines
Three main Business Lines 1 2 3 Financing and Non- Credit Collection Non-recourse Factoring in Southern Europe Recourse Factoring in CEE Management (i.e. Servicing) % on total 74% 23% 3% revenues(1) 4% 1% 0.04% 3% 1% 8% Volumes by 30% geography 65% 96% 92% Italy Spain(*) Portugal Greece Croatia + Fr
Slide 10: Strong barriers to entry in our market…
Strong barriers to entry in our market… ▪ Strong customer loyalty from large and multinational companies Large and ▪ Opportunity to leverage customer relationships across geographies Stable Top 10 clients with BFF on ▪ Constantly present and able to serve clients also in times of stress (i.e. 2011-1
Slide 11: …With revenues coming from both suppliers and debtors
…With revenues coming from both suppliers and debtors Public Sector Suppliers (BFF’s Clients) Public Sector Entities (BFF’s Debtors) ▪ Leading multinational and national suppliers ▪ Debtors are PA in the EU of the public sector − Central government entities (i.e. For illustrative purpose only minist
Slide 12: With excellent growth opportunities ahead
With excellent growth opportunities ahead Organic growth opportunity > 10% p.a. volume and loans growth Long-Term Public Expenditure Increase Market Penetration New Markets Growth Growth on the back of HC and public Only c. 10% of €270bn PA invoices Potential new PA markets account for expenditure g
Slide 13: Disciplined approach to value-creation M&A
Disciplined approach to value-creation M&A Adjacent sectors Existing business New niche markets 2016 2019 2020 Targets profile: Targets profile: ▪ Operating in the same businesses of BFF or in adjacent sectors ▪ Attractive asset yield with a low risk profile ▪ Operating in niche business covered by
Slide 14: Delivering the vision set in “BFF 2023” Strategy
Delivering the vision set in “BFF 2023” Strategy 2023 STRATEGIC GOALS ACHIEVEMENTS IN 2Q 2020 ACHIEVEMENTS IN 2H 2019 AND 1Q 2020 ANNOUNCED IN JUNE 2019 DURING COVID-19 PANDEMIC ▪ Opened a branch in Greece ▪ Further strengthened the leadership position in Italy, (Athens), fully operational from with
Slide 15: Table of Content
Table of Content 1. Overview 2. 1H 2020 results: beating the virus 3. Funding, capital & asset quality 4. Annexes - DEPObank acquisition - P&L and Balance Sheet summary 14 14
Slide 16: 1H 2020 results: beating the virus
1H 2020 results: beating the virus ▪ No significant negative impacts for BFF due to COVID-19 pandemic, besides lower LPIs over-recoveries COVID-19 ▪ LPIs collection and legal actions affected by PA in remote working and courts’ lockdown, leading to lower LPIs over- recoveries, but higher LPIs stock
Slide 17: €40m Adjusted Net Income, with lower LPI over-recoveries and increased NPL coverage
€40m Adjusted Net Income, with lower LPI over- recoveries and increased NPL coverage Adjusted Net income(1) (€m) ▪ Adjusted Net Income flat y/y at €40.2m vs. Adjusted €41.2m in 1H19, despite (i) net LPIs over-recovery RoTE(2) 32% 33% 30% Reported €2.6m lower than 1H19, with €3.7m lower LPIs 41 40 ca
Slide 18: Growing Interest Income and LPIs stock
Growing Interest Income and LPIs stock Adjusted Interest Income (€m) ▪ 1H20 Interest Income at €117m, +7% y/y vs. Ann. Customer interest 1H19, despite €2.6m of lower net LPIs over- 7.1% 6.0% 5.7% income/loans(2) recovery(1) accounted in P&L vs. previous year 10.8% 9.8% 9.8% Adj. interest income/RWAs
Slide 19: Single digit growth of Adjusted Net Interest Income and Net Banking Income
Single digit growth of Adjusted Net Interest Income and Net Banking Income Adjusted Net Interest Income (€m) ▪ Adjusted Net Interest Income and Adjusted Net Ann. RoRWA (1) 8.7% 7.7% 7.6% Banking Income +5% y/y vs. 1H19, with: Ann. Net customer 5.5% 4.6% 4.2% int. income/loans(2) - €2.6m of lower net
Slide 20: Good operating efficiency despite continuous investment in growth
Good operating efficiency despite continuous investment in growth Operating Costs (€m) (1) ▪ Highly efficient structure with Adjusted Operating Adjusted Operating 2.29% 2.01% 2.03% Costs (1,2)/Loans (3) Costs(1,2)/Loans ratio of 2.03% in 1H20 vs. 2.01% in Adjusted (1,2) 38% 40% 42% 1H19 and 2.29% in
Slide 21: Double digit growth in Customer Loans
Double digit growth in Customer Loans ▪ Strong growth in customer loans at €3.8bn (+10% y/y) throughout Customer Loans Evolution (€m) the Group: +11% at constant − Italy grew by 2% y/y Euro/Zloty FX rate − Spain +100% y/y excluding IOS Finance for 1H19 (+21% y/y 3,789 including IOS Finance for 1H19)
Slide 22: Double digit growth in New Business Production
Double digit growth in New Business Production Total New Business Volume (€m) ▪ New business grew by 29% y/y with volume at €2.5bn in 1H20: BFF Polska Group (€m) 324 − Resumed growth in Italy (+3% y/y) 2 279 17 3 247 28 1 − Spain +132% y/y excluding IOS 2,541 2 Finance for 1H19 (+39% y/y 324 305 Cze
Slide 23: Table of Content
Table of Content 1. Overview 2. 1H 2020 results: beating the virus 3. Funding, capital & asset quality 4. Annexes - DEPObank acquisition - P&L and Balance Sheet summary 22 22
Slide 24: Cost of Funding at 1.60%
Cost of Funding at 1.60% ▪ Interest expenses increased at €26m (+15% y/y), due Adjusted Interest expenses (€m) to: – the increase of average drawn funding from €3.2bn Average funding lines to €3.6bn, with more online deposits and less other used (excluding 2,607 +22% 3,176 +14% 3,607 REPO, €m) whole
Slide 25: Strong liquidity and no ECB financing
Strong liquidity and no ECB financing Available Funding(2,3) (€m) ▪ Significant increase in available funding at €4.1bn, +16% y/y LCR 250.8% 499.1% 520.1% − €0.7bn(1) excess liquidity (undrawn credit lines), +66% NSFR 111.3% 107.4% 107.9% y/y, which provides higher flexibility of BFF’s balance NSFR
Slide 26: Demonstrated access to institutional market across instruments, ratings and placements
Demonstrated access to institutional market across instruments, ratings and placements Key considerations Capital markets activity of BFF (excl. BFF Polska) ▪ Successfully proven access to capital markets also Issuance Amount on different maturities with €1.25bn of total bonds Maturity Type Comments
Slide 27: Ratings
Ratings Moody’s Long-term Issuer Rating Ba1 - Developing outlook Long-term Bank Deposits Rating Baa3 - Positive outlook Short-term Bank Deposits Rating P-3 Baseline Credit Assessment (BCA) Ba3 Date of last update: 12/06/2020 Key considerations ▪ In June 2020 Moody’s confirmed all Banca Farmafactorin
Slide 28: Fortress Balance Sheet with conservative ALM
Fortress Balance Sheet with conservative ALM Key considerations Breakdown of Balance Sheet 1H 2020 (€m) ▪ Customer loans funded through a well diversified funding Leverage 4.5% Ratio base LCR 520.1% ▪ Conservative asset / liability management NSFR 107.9% 5,923 5,923 ▪ Natural currency hedge: forex a
Slide 29: Negligible credit risk
Negligible credit risk ▪ Net NPLs excluding Italian municipalities in Net Non Performing Loans Evolution (€m) conservatorship down to €3.2m (-37% y/y and -25% vs. YE19) and 0.1% of net loans, with an 81% coverage NPL Ratio 1.3% 1.5% 1.7% ratio up from 75% at YE19 Coverage Ratio 21% 17% 18% ▪ Increas
Slide 30: Strong capital position, with €108m of dividend capacity
Strong capital position, with €108m of dividend capacity ▪ Total Capital ratio at 15.7% and CET1 ratio at Total Capital Ratio - Banking group ex TUB(1) 11.5%(1) excluding: SREP requirement Under the Standard Model, the incl. CCB risk weighting factors for CET1 11.6% 10.9% 11.5% 7.85% exposures to NH
Slide 31: Table of Content
Table of Content 1. Overview 2. 1H 2020 results: beating the virus 3. Funding, capital & asset quality 4. Annexes - DEPObank acquisition - P&L and Balance Sheet summary 30 30
Slide 32: Key pillars of DEPObank acquisition
Key pillars of DEPObank acquisition Key benefits of the Transaction ✓ ✓ Addition of fee-based income → 30% of combined entity’s revenues from securities services and payments business ✓ ✓ Access to a significant and low cost funding base → c. €7.5bn currently invested in low/negative yield assets ✓
Slide 33: DEPObank: specialized player in Securities Services and Payments businesses
DEPObank: specialized player in Securities Services and Payments businesses Diversified revenue mix among Securities Services, Payments and Treasury (1) Total Gross operating Customer Revenues (€m) margin (€m) FTEs (#) deposits (€bn) 139 42 363 7.5 ` Treasury function manages the liquidity generated
Slide 34: ~€7.5bn of liquidity invested in Italian Government bonds and ECB deposits
~€7.5bn of liquidity invested in Italian Government bonds and ECB deposits available to fund BFF’s low risk and short-term credit business Key considerations DEPObank liquidity as of 31/12/2019 (€bn) ▪ DEPObank’s liabilities mainly consist of BFF cost of funding customer deposits for €7.5bn. Such li
Slide 35: Capital neutral confirming BFF’s disciplined approach in M&A
Capital neutral confirming BFF’s disciplined approach in M&A No impact on BFF’s Total Capital ratio: both the shares to be issue in the context of the merger and the badwill generated by the Transaction are expected to cover the capital absorption @ 15% TC ratio target. Positive impact on Tier 1 rat
Slide 36: Significant value creation, with €25-35m run-rate synergies…
Significant value creation, with €25-35m run-rate synergies… Pre-tax annual run rate synergies (€m) Key initiatives Funding synergies ▪ Deployment of DEPObank’s liquidity (c. €7.5bn at YE19) to fund BFF’s Euro business Funding Equal to 20-30bps over DEPObank − Current BFF funding lines assumed to be
Slide 37: Expected closing in February 2021, based on Bank of Italy and ECB clearance timetable
Expected closing in February 2021, based on Bank of Italy and ECB clearance timetable 13-May-20 ✓ Signed the Agreement for the acquisition of DEPObank Approval of the Merger plan by BFF and 24-Jun-20 ✓ DEPObank’s Board of Directors 30-Jun and 7-Jul 2020 ✓ Clearance of Antitrust and Golden Power Expe
Slide 38: Post DEPObank merger
One of the few Italian Public Companies BFF shareholding structure Shareholding structure ▪ One of the few Italian public companies, with 88% 4.3% Management(1) free float (doubled vs. 44% at IPO), of which c. 4% 11.9% held by management(1) BFF Luxembourg Today (Centerbridge) 83.7% ▪ In the context
Slide 39: Summary Profit & Loss
Summary Profit & Loss 1H18 1H18 1H18 1H19 1H19 1H19 1H20 1H20 1H20 Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Interest Income 108.3 108.3 108.6 108.6 116.5 116.5 of which interest income calculated using the effective interest rate method 93.7 93.7 100.
Slide 40: Summary Balance Sheet
Summary Balance Sheet 1H18 1H19 1H20 Reported Reported Reported Cash and cash Balances 38.6 36.1 111.2 Financial assets measured at fair value through profit or loss 0.0 0.0 0.0 a) financial assets held for trading 0.0 0.0 0.0 b) financial assets designated at fair value 0.0 0.0 0.0 c) other financi
Slide 41: Breakdown by quarter – BFF Banking Group
Breakdown by quarter – BFF Banking Group Adjusted Values 2018 2019 2020 Data in €/m 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY 1Q 2Q Interest income 53.4 54.9 49.3 74.0 231.6 55.9 52.7 55.3 85.1 249.0 57.4 59.1 Interest expenses (11.3) (10.1) (10.3) (11.2) (42.9) (11.5) (11.3) (12.3) (13.5) (48.4) (14.1) (11.9)
Slide 42: Asset quality
Asset quality 30/06/2020 €/000 Gross Provision Net Total non performing 79,743 (14,156) 65,588 Total unlikely to pay 18,350 (2,283) 16,067 Total past due 49,915 (1,048) 48,868 Total 148,008 (17,487) 130,522 30/06/2019 €/000 Gross Provision Net Total non performing 57,016 (11,805) 45,211 Total unlike