Bff Bank Spa · MIL:BFF
Bff Bank Spa — BFF Banking Group — 9M 2020 Earnings Presentation
38 slides from Bff Bank Spa's earnings presentation, November 2020
Slide 1: Virtual roadshow post 9M 2020 results
Virtual roadshow post 9M 2020 results November 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: Today’s speakers
Today’s speakers Massimiliano Belingheri Group CEO Caterina Della Mora Piergiorgio Bicci Director, Group Investor Chief Financial Officer Relations, Strategy and M&A 22
Slide 4: Key takeaways
Key takeaways ▪ Solid financial performance and profitability, improved risk profile, ample funding and capital, good volume growth, stable portfolio - Flat adjusted net income, +10% y/y net of LPIs over-recoveries - New business volume up by 25% y/y at €3.8bn Financial - Customer Loans portfolio up
Slide 5: Resilient business amidst economic downturn and high liquidity environment
Resilient business amidst economic downturn and high liquidity environment BFF fully ▪ BFF Banking Group is fully operational, with employees back to remote working from early November operational 2020, as in March-July 2020. PA not fully ▪ Limited PA focus on negotiation of LPIs settlements operati
Slide 6: Adjusted Net Income stable at €60m
Adjusted Net Income stable at €60m Adjusted Net income(1) (€m) ▪ Adjusted Net Income flat y/y at €59.9m vs. 31% 33% 30% Adjusted RoTE(2) €60.6m in 9M19, despite: Adj. net income net 50 58 +10% 64 of LPI over-recovery (i) net LPIs over-recovery €8.7m lower than 58 61 60 60 58 56 9M19, with €13.9m low
Slide 7: Growing Interest Income and LPIs stock, with significant income deferral
Growing Interest Income and LPIs stock, with significant income deferral Adjusted Interest Income (€m) ▪ 9M20 Interest Income at €171m, +4% y/y vs. Adj. interest 10.5% 9.9% 9.8% income/RWAs(2) 9M19, +10% net of lower net LPIs over- recoveries(1) vs. previous year Adj. Int. income net 147 161 +10% 17
Slide 8: Cost of Funding at 1.58%
Cost of Funding at 1.58% ▪ Interest expenses increased at €37m (+5% y/y), Adjusted Interest expenses (€m) due to: Average funding 2,609 +21% 3,169 +11% 3,520 lines used – the increase of average drawn funding from (excl. REPO) €3.2bn to €3.5bn, with more online deposits and less other wholesale line
Slide 9: 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 8.4% 7.8% 7.7% Ann. RoRWA(1) Net Banking Income +4% y/y vs. 9M19, +11% +11% Adj. NIM net of LPI 116 126 140 over-recovery y/y net of lower net LPIs
Slide 10: Good operating efficiency, despite continuous investment in growth
Good operating efficiency, despite continuous investment in growth Operating Costs(1) (€m) ▪ Flat Adjusted Operating Costs/Loans ratio of 2.05% in 9M20, vs. 2.05% in 9M19 and 2.24% in Adjusted Operating 2.24% 2.05% 2.05% Costs(1,2)/Loans(3) 9M18, despite investment in growth Adjusted(1,2) 38% 40% 43
Slide 11: Low-single growth of Customer Loans in a contest of high liquidity
Low-single growth of Customer Loans in a contest of high liquidity ▪ Customer loans steady at €3.7bn (+3% y/y): Customer Loans - Breakdown by geography (€m) – Italy flat y/y, with high liquidity in the system that accelerated the collection of newest invoices, vs. Without With IOS factoring market d
Slide 12: Double digit growth in New Business Volume
Double digit growth in New Business Volume Total New Business Volume (€m) ▪ New Business Volume grew by 3,815 BFF Polska Group (€m) 25% y/y at €3.8bn in 9M20: 560 22 2 560 – Italy stable over €2.0bn (+1% 400 385 2 y/y), notwithstanding the 3,051 7 30 10 2,959 negative performance of the 400 536 Czec
Slide 13: Strong liquidity and no ECB financing
Strong liquidity and no ECB financing ▪ Significant increase in available funding at €4.1bn, Available Funding(2,3) (€m) +15% y/y, to withstand any potential market shock LCR 167.5% 352.0% 292.9% − €0.9bn(1) excess liquidity (undrawn credit lines), +139% y/y 105.7% 109.2% 110.8% NSFR ▪ A diversified
Slide 14: Fortress balance sheet, €33m of unrecognized M2M gains on HTC portfolio
Fortress balance sheet, €33m of unrecognized M2M gains on HTC portfolio ▪ Customer loans funded through a well diversified Breakdown of Balance Sheet 9M 2020 (€m) funding base Leverage Ratio 4.6% ▪ Conservative asset / liability management ▪ Natural currency hedge: forex assets funded with 5,696 5,6
Slide 15: Prudent provisioning and negligible credit risk. Declining private sector NPLs
Prudent provisioning and negligible credit risk. Declining private sector NPLs ▪ Net NPLs ex Italian municipalities are down to Net Non Performing Loans Evolution (€m) €3.2m (-33% y/y) at 0.1% of net loans, with an 81% 0.1% 0.1% 0.1% NPL Ratio excl. Italian municipalities coverage ratio up from 75%
Slide 16: BFF ready to New Definition of Default
BFF ready to New Definition of Default ▪ The new EBA definition of default “Guidelines on the application of the definition of default under Art. 178 of Regulation (EU) no. 575/2013” enters into force on 1st January 2021: i) days to past due are 180/90 New DoD for public/private debtors; ii) elimina
Slide 17: Strong capital position, with c. €127m of dividend capacity
Strong capital position, with c. €127m of dividend capacity ▪ Total Capital ratio at 16.5% and CET1 ratio Total Capital Ratio - Banking group ex TUB(1) at 12.0%(1). Since TCR is >15%, dividend 2020 SREP DBRS Rating Country RWA capacity of c. €127m coming from: requirement CET1 ratio AAA – €70.9m of
Slide 18: One of the few Italian Public Companies, with governance aligned to best market practices
One of the few Italian Public Companies, with governance aligned to best market practices BFF is already one of the few Italian public companies, Today with the historical shareholder Centerbridge down from 56% at IPO in 2017 to 7.9% to date, post completion of 5 4.3% ABBs (of which 3 in 2020) 7.9%
Slide 19: Next events
Next events 11-19th Virtual roadshow post 9M 2020 results in Europe, UK and USA November 2020 18th November Exane BNP Paribas – 3rd European MidCap CEOs Conference (Virtual) 2020 Expected Shareholders’ Meeting for 2019 Dividend distribution (assuming no January 2021 changes in regulatory guidelines)
Slide 20: Background material
Background material bffgroup.com 19
Slide 21: 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 22: BFF: A Bank Like No Other®
BFF: A Bank Like No Other® Highly Capital Generative Significant Deferral of No Credit Losses on Model Income Factoring 38% €423m Zero on Public sector Adj. Return on Tangible Equity off-balance sheet back-book income reserve €5.5m(2) >€650m (unrecognised stock of LPIs) cumulated last 13 years, Divi
Slide 23: Three main Business Lines
Three main Business Lines 1 2 3 FINANCING AND NON- NON-RECOURSE FACTORING IN CREDIT COLLECTION RECOURSE FACTORING SOUTHERN EUROPE MANAGEMENT IN CEE % on total 74% 23% 3% revenues(1) New €4,725m €587m €3,143m Business Volumes Portugal Greece Croatia + France Slovakia Czech Republic 1% 0.04% 1% 4% 3%
Slide 24: Leading provider of Working Capital solutions to public sector suppliers in the EU
Leading provider of Working Capital solutions to public sector suppliers in the EU ▪ Some European countries have structural >€400bn of public expenditure in goods & services (1) in the EU countries delays in payments due to the Public BFF Banking Group operates in Administration suppliers, because
Slide 25: With revenues coming from both clients and debtors
With revenues coming from both clients and debtors Public sector suppliers Pay purchase price Collect cash Public sector entities (BFF’s clients) (debtors) Sell receivables Active collection of receivables + + Late payment interests Maturity commissions (LPIs) Public Sector Suppliers (BFF’s Clients)
Slide 26: Stable operating environment, underpinned by EU Directive made more stringent over time
Stable operating environment, underpinned by EU Directive made more stringent over time ▪ LPIs in commercial transactions are regulated by Payment Statutory the Late Payment Directive n° 2011/7/EU (LPD): EU Directives/resolutions on PA terms interest Year when invoices due by PA are not paid on time
Slide 27: Significant income deferral due to a prudent accounting of Late Payment Interests
Significant income deferral due to a prudent accounting of Late Payment Interests ▪ Receivables against PA accrues LPIs (regulated by an EU Therefore, full impacts on P&L of the LPIs generated by Directive) when not paid on time at ECB refinancing the growing outstanding over the last years will be
Slide 28: Revenue recognition for non-recourse factoring
ILLUSTRATIVE Revenue recognition for non-recourse factoring Assumptions for this illustrative example ▪ BFF purchase date: 31-Dec-19 ▪ LPIs collection time: 5 years → 31-Dec-24 ▪ Nominal value of the invoice (principal): €100k ▪ Statutory accrued LPIs for BFF: 45% → €3.6k ▪ Maturity commission (disc
Slide 29: Appendix
Appendix bffgroup.com 28
Slide 30: Non-recourse Volume (1/2)
Non-recourse Volume (1/2) Non-recourse growth Volume (€m) 9M20 vs. 9M19 Italy 9M 2018 1,262 731 40 2,032 9M 2019 1,289 671 54 2,015 +1% 9M 2020 1,363 607 63 2,032 Spain 9M 2018 154 296 232 682 9M 2019 242 273 290 805 +32% 9M 2020 685 379 1.063 Portugal 9M 2018 85 0 85 9M 2019 86 1 87 +18% 9M 2020 93
Slide 31: Non-recourse Volume (2/2)
Non-recourse Volume (2/2) Non-recourse growth Volume (€m) 9M20 vs. 9M19 Greece 9M 2018 6 1 7 9M 2019 27 7 34 +35% 9M 2020 41 6 46 Croatia 9M 2018 0 9M 2019 00 N.a.% 9M 2020 0 0.8 France France 9M 2018 0 N.a. 9M 2019 0 N.s. 9M 2020 9 10 NHS P.A. Other 30 30
Slide 32: New Business Volume
New Business Volume New Business growth New Business (€m) 9M20 vs. 9M19 Poland 9M 2018 299 43 7 349 9M 2019 338 49 0 388 +38% 9M 2020 415 121 536 Slovakia 9M 2018 27 3 30 9M 2019 3 7 10 +127% 9M 2020 19 2 22 Czech 9M 2018 7 Republic 9M 2019 2 -16% 9M 2020 2 Healthcare Local Government Commercial Fac
Slide 33: Traditional business subject to seasonality, with peak in 4Q
Traditional business subject to seasonality, with peak in 4Q Loans Evolution by Quarter (€m) 1Q 2Q 3Q 4Q BFF Polska Group IOS Finance 4,118 137 3,738 3,789 3,583 3,563 3,683 3,461 3,454 96 890 3,026 760 859 882 873 3,018 2,878 3,000 767 794 849 2,499 2,531 2,5572,596 627 3,090 2,270 2,319 2,212 619
Slide 34: Adjusted Net Income reconciliation
Adjusted Net Income reconciliation €m 9M18 9M19 9M20 Group BFF Reported Net income 58.0 60.1 55.8 Exchange rates movement (offset at the comprehensive income and equity level) (1.5) (1.1) (3.9) Stock Options & Stock Grant 0.9 1.3 1.1 Extraordinary Resolution Fund contribution 0.5 0.5 0.5 M&A costs 1
Slide 35: Summary Profit & Loss
Summary Profit & Loss 9M18 9M18 9M18 9M19 9M19 9M19 9M20 9M20 9M20 Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Interest Income 157.7 157.7 163.9 163.9 170.7 170.7 of which interest income calculated using the effective interest rate method 136.0 136.0 14
Slide 36: Summary Balance Sheet
Summary Balance Sheet 9M18 9M19 9M20 Reported Reported Reported Cash and cash Balances 13.2 26.0 74.2 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 financia
Slide 37: 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 3Q 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 54.2 Interest expenses (11.3) (10.1) (10.3) (11.2) (42.9) (11.5) (11.3) (12.3) (13.5) (48.4) (14.1)
Slide 38: Asset quality
Asset quality 30/09/2020 €/000 Gross Provision Net Total non performing 80,916 (14,106) 66,811 Total unlikely to pay 17,984 (2,269) 15,715 Total past due 46,531 (1,528) 45,003 Total 145,432 (17,903) 127,529 30/06/2020 €/000 Gross Provision Net Total non performing 79,743 (14,156) 65,588 Total unlike