BFF Bank (Milan:BFF) Q2 2026 Earnings Call

0:00 Good afternoon, and welcome to BFF Banking Group First Half twenty twenty six Earnings Call. All participants will be in listen only mode. Please note this event is being recorded. I would like to turn the conference over to Caterina de la Mora, Head of Investor Relations Giuseppe Sica, Group CEO and Luigi Luelli, Group CFO.

0:46 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, Ruigi Rubelli, followed by Q and A. Let me hand over now to Giuseppe. Thank you, Katharina. Let's start on Slide two with the key highlights, which reflect our focus on execution and the strategic deleveraging, which will have to continue in coming quarters. This focus on execution and the resilience of the bank has enabled us to grow adjusted net profit by 8% versus first half twenty twenty five, even in what remains and will continue to be a challenging environment.

1:42 Our Payments and Security Services business continued to perform well, as you will see in a moment. In line with our strategic deleveraging, 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. Notwithstanding the anticipation of calendar provisioning from 3Q to 2Q, we have maintained our pro form a capital ratios above regulatory requirements as we said we would do. 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.

2:33 This is why we have a number of strategic options under review, which includes, but are not limited to, possible securitization. A fundamental review in the MISS model is under consideration. 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%, 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.

3:23 Adjusted net income is up 8%. Factoring loans are down 5% compared to year end 2025. This is fully in line with our strategic deleveraging and focus on profitability. 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 have simplified messages, but overall deposits grew versus Q1 twenty twenty six. And finally, our pro form a CET1 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 EUR 30,000,000 and close to 90,000,000 impact from the anticipation of calendar provisioning.

4:20 Let's look at net profit in more detail on Slide four. BFF underlying business performance is resilient and drove an 8% increase in adjusted net profits. This is thanks to robust performance of Transaction Services, which goes up year on year and continues to invest for growth and is collecting successes. Disciplined 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've also strengthened our collection team. And finally, effective cost control.

5:09 I would also like to point out that our reported net profit would have been up 3% year on year if we exclude the impact of the Bank of Italy inspection report. Following slide. Group profit before tax is up 7%, demonstrating our ability to maintain profitability in the context of our focus on strategic deleveraging. A bit more of detail on the various divisions. PBT for Security Services and Payments rose 15% year on year to €27,000,000 It could have reached €63,000,000 if liquidity had been invested in Italian government bonds.

5:59 This will generate over €120,000,000 if annualized. Factoring and lending performance was mainly affected by portfolio derisking. The derisking will be apparent as I will talk about our net exposure to negative court ruling, which has gone down from $240,000,000 at 2025 end to 100,000,000 Corporate center has benefited from improved funding rates, focus on cost and the HTC portfolio. I'm now going to hand over to Luigi for more detail on the numbers as well as the business performance. Thank you, Giuseppe.

6:49 Good evening, everyone. Firstly, I'm delighted to have joined BFF and of having the pleasure of speaking to you today for the first time about our results. 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. In H1, 64% of net revenues were generated by activities outside our factoring and lending business, and this compares 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 derisking, which also resulted in significantly lower exposure to negative court rulings.

7:42 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. Let us now move to Slide seven, where we show you the net interest income, which was stable compared to the first half of twenty twenty five. This primarily benefited from an improved spread, which was up 21 basis points compared to a year ago and offsets the effect of a smaller loan book. 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 LPI's as well as on quick collections, which has resulted in lower reschedulings.

8:36 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, 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 pipeline. 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. 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.

9:33 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. On Slide nine, you can see our disciplined approach to cost management, which has allowed us to reduce our cost income ratio 46%, even after inflation and accommodating for our continued investment in transaction services focusing on system upgrades. In factoring and lending, you see an increase on costs in costs, which was related to the review of processes. And now I give the word back to Mr. Siga. Thank you, Reg.

10:22 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. The overall reduction in deposits is linked to the rebalancing of the group liquidity mix. In payments, commercial activity is picking up and with a significant improvement in deposits in Q2, which was up 18%. Finally, in factoring and lending, we've been pursuing a selective approach to loan origination, focus on quality, profitability and derisking actions. The business remains highly profitable on an underlying basis, but we will continue to increase focus on profitability versus volumes and improve operational effectiveness, which is key given the EBA definition of defaults.

11:21 New ways to operate in the business will be needed in order to address the calendar provisioning. Moving to our help to collect Italian government bonds. We announced the repositioning of our portfolio on July 28. This included the sale and investment of around 30,100,000,000 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. The impact was not conservatively included in the previous capital conservation plan. Government bonds represent circa 40% of our total assets. This is also to protect the interest of all of our clients in the transaction services divisions.

12:15 Liquidity remains strong and stable, actually improving versus Q1. This 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, 72,000,000, in the transaction services deposits. Cost of funding decreased significantly year on year, while spread was broadly stable. Looking at the customer loan portfolio on Slide 13, we already mentioned diversification is an important contributor to our resilience. This is also true for our customer loan portfolio.

13:03 Driven by our selective approach in origination as well as improved collection, the factory loan book has decreased by 11%, while factoring exposure accounted for less than half of the total loan book in the first half of twenty twenty six. It also benefits from geographical diversification, with Italian factoring representing just below onethree of the loan book. Now let me move to Slide 15 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 court rulings in this period, which decreased by 60% and stands now at $100,000,000 versus $243 six months ago.

14:04 Net NPLs, let me remind you, mainly represents by Italian conservatorships, are down by 25%. UTP increased due to the impact of Bank of Italy report on the classification of certain Polish public hospitals. The cost of risk at 12 basis points is more than double compared to 1H and reflects a more conservative approach to provisioning, still 12 basis points. This follows the significant cleanup affected at year end. Slide 15 shows the quality of our origination, which has allowed us to collect 95% of the twenty twenty five volumes, and already 70% of the first half volumes.

14:59 In terms of past due collection, we have collected more than €2,000,000,000 in the first half, which corresponds to around €300,000,000 of common equity Tier one. 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 anticipated the impact of calendar provisioning from 3Q to 2Q in light of the new EBA Q and A. We now have an impact of close to $150,000,000 from calendar provisioning. It's a big number. But as of June 2024, the impact would have been around $400,000,000 We are therefore efficient introducing the portfolio affected by the calendar and will continue to be so.

15:58 The new reclassification from Bank of Italy, which we affected at year end, adds additional burden, of course, as now also LTI are included in the contingent portfolio and tend to stay on our balance sheet for almost seven years, so it would be fully deducted from capital. 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 twenty twenty seven calendar provisioning. That is why we have put in runoff a small factoring portfolio in the country, which is contagious.

16:47 The rest and much larger of our profitable lending book in the country, 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 one ratio. As you can see, these improved both on a stated and on a pro form a basis. Importantly, our organic capital generation remains very strong at nearly two percentage points in six months. The combined impact of calendar provisioning and Banco de Italy report is lower than our organic capital generation.

17:35 We have affected the sale of HTC bonds at the end of July, which has allowed to respect all capital ratios on a pro form a basis, which was not the case at year end. 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. RWAs are down $500,000,000 since year end. RWA density has also gone down. Capital is up compared to year end, and we expect all capital ratios on a pro form a basis, including MREL.

18:24 Before we start the Q and A, I would like to summarize the key takeaways from the set of results on Slide 19. BFF continues to achieve adjusted net profit growth, thanks to its focus on execution. The Transaction Services business is performing well. In line with the derisking program, the factoring and lending business is managed in a disciplined manner. The pro form a 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 and A. To ensure that we can take everyone's questions, we kindly ask you to limit yourself to three questions.

19:15 We will now begin the question and answer session. The first question comes from Thomas Oyeddu with Kepler Cheuvreux. 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 if you can quantify what you expect from this same vintage in 2027.

20:12 What guidance can you give today on the size and timing of those steps? I understand from the press release that it should still allow you to be compliant to requirements, but more info would be very helpful. 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 twenty twenty six? And is investor engagement on the junior and MEDS tranche is still active? The third question is on the press speculating on a potential split of the group. Separately, today, have disclosed that the Board has received preliminary nonbinding expressions of interest from domestic and international parties.

21:05 So can you clarify whether a full or partial breakup of them is one of the structure under active consideration, or whether the expression of interest received, relate to the group as a whole? Thank you a lot. Thank you, Thomas. I'll try to answer to the best of what I can say today. In terms of calendar provisioning, we don't provide the explicit projections, but we say that we respect all capital ratios in 2027. 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.

22:01 And let me remind you, the first half of the year, Can you hear me? Yeah. Yeah. Now I can hear you. Sorry. We had sorry. Had a problem, Thomas. I don't know. I'll I'll, I will not repeat, but if I skip any any other points, let me know. So what I was saying is we have already offset the first wave of calendar provisioning impact and the impact of, 30,000,000 from Banco Italy inspection report with our first half earnings and the leveraging.

22:46 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 we are making. As you've seen, we've gone from, 400 to 140 in six quarters. 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 said on previous calls. 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.

23:39 The board is not working on, on a split of the of the group, And so we will have to analyze the various options that the bank has at its disposal. Okay. Thank you a lot. The next question comes from Giovanni Razzoli with Deutsche Bank. Please go ahead. Good afternoon to everybody. I have a couple of questions. One is a clarification on Slide 16. So the EUR 141,000,000 of calendar provisioning impact is the one in the second quarter of twenty twenty six. Is it the one that is embedded in your CET1 ratio as of now following the anticipation of the decision of Bank of Italy to bring forward in the second quarter the impact of the calendar provision? So that is my first question.

24:45 And the second question is, if this EUR 141,000,000 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 vintages, is it fair to assume that the second quarter of twenty twenty seven is another relevant cutoff for another potential significant impact of the calendar provision, all else being equal, so assuming that there are no collection or other managerial actions. So just to have an understanding of, on a static basis, what would be the impact on your CET1 ratio? And another question, can you explain can you provide more details about the downsizing downsizing, sorry, of the Polish factoring product?

25:42 So you mentioned that you are selling a small portfolio, which is providing a significant impact in terms of contagion, is, my understanding, correct. Thank you. Thank you, Giovanni. Yes, the $141,000,000 is what is already deducted from, our capital as of June 2026. However, as you know, we already had around 50,000,000 of calendar provisioning in the past. 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 85,000,000, and there would be numbers so you can, work out what the 65% would be.

26:31 However, as as already said to Mazo, we offset the 85 and the impact of Bank of Italy inspection report with one semester of earnings. And to do the initial numbers or the mathematical numbers 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. K? So I would say you can run the numbers. You should certainly account for a a reduction of the overall impact because of collections and other measures that we are taking.

27:19 On the, on Poland, sorry. I was not very clear. So we have a small book. It's around 100,000,000 of factoring like products. And this factoring is often beyond one hundred and eighty days. And because of the letter which we received in March from Bank of Italy, it was classified as past due, which was not the case before because it was not notification factoring. So by running off or deleveraging, I didn't talk about disposal, by deleveraging and reducing this 100,000,000, the level of contagion on the lending book of Poland would reduce dramatically, and so we would expect a significant number of our lending books 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.

28:35 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 contagious exposure. Yes. In Italy, there are Poland, we collect this factoring on average in two years. So we can run it down quickly. And above all, the the the component of LPI is very small. In Italy, the impact of the LPI after, the reclassification of March is much more important, so we cannot collect this contagion exposure in Italy that quickly. Okay. And just a very, very quick follow-up.

29:22 Thank you for your clarification. Again, back on that slide, I would assume that the decrease from EUR 400,000,000 to EUR €141,000,000 does this impact reflect also this effect of Poland? Or is this something that we will see in the future? No. It will be seen in the future. This was a decision that was taken, in fact, after the June 30. Okay. Thank you. The next question comes from Manuela Meroni with Intesa Sanpaolo. Please go ahead. Good evening and thank you for taking my questions. The first one is on the calendar provisioning. You said that to expect to expect the capital ratios in 2027.

30:10 What about 2028? Do you have some updated expectation on 2028? The second question is on the strategic options that you mentioned on top of the securitizations. 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? What will be the contribution of the government bond portfolio in the second half of twenty twenty six? And more in general, if you can confirm your guidance in terms of net income for 2026.

30:59 Thank you. Okay. So on the impact, I start to 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 a running rate basis. As you know, we have around 1,000,000,000 of bonds which yield 0.6% fixed, which are going to expire in 2027. So we largely more than offset the impact of this slightly lower, net income. We have not we have not updated our estimates for, for the year.

32:00 You've seen how much we have delivered in the first half of the of the year. On the securitization, I'm afraid I can't give you much more detail than what I've said before. But 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. The calendar provisioning, yeah, we said we respect, the ratios in 2026. We said we expect the ratios in 2027. In the context of the annual report, we said we had a small breach in 2028.

32:47 Now because of the anticipation of the calendar provisioning, one may have thought that we would have had 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, the deleveraging that I discussed a few minutes ago with Giovanni on 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.

33:35 There is some disclosure in the in the press release what these actions are, and I think we have many options that we can evaluate. We don't need to do all of them. 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 too, 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 to be able to generate more capital in the future. The next question comes from Michael Miedzinski with Roche Capital.

34:32 One question for me. Can we rule out a capital raise, an equity raise at this stage? I mean, you've managed to, you know, protect your your capital tier one ratio, you know, despite a number of headwinds. And it looks like it's going to, you know, on an upward trajectory from here. So, is it fair to say that, you know, a capital raise is not an option at this stage? Thank you. I just got the same question I got asked, Tiara in the, probably, also first quarter, and I said that we are not working on a a capital raise.

35:24 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 to be profitable and to generate capital. This is the prerequisite of anything that we are working on, frankly, the target for anything that we are working on. Okay. Thank you. The next question comes from David De Giuliano with Equita. Please go ahead. Hi. Good evening and thank you 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. So if you could provide us more color would be helpful. The second one on the loan loss provision. Can you comment on the write backs, 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.

36:50 Can you explain better the decline in NII in the factoring and lending division, which if I'm not mistaken, went from EUR65 million in Q1 to EUR41 million in Q2? How much is the associated provision release? And just clarification on the slide, you stated that IRR excluding LPI is 6% compared to 9% including LPI. Is it correct to say that one third of interest income derives from the accrual of LPI's sorry? Thank you. Thank you, David. On let me say a second. We we are very pleased with the execution of the transaction service, both DeepaBank and Payment.

37:37 DeepaBank lost one client in the second quarter. This client communicated to us around two years ago. So before anything that happened to BFF, that they would leave the company, and they went somewhere else. So that drives the decrease in deposits of the depositary bank. At the same time, we have had many onboardings, and, frankly, we are having more we have had more in July, probably one important one yesterday. So that was to be expected. On payments, I'm happy 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 gone out. So we have normalized that, and it's under control.

38:39 The profitability of the factoring lending, I think the profitability of the factoring and lending and the lower net interest income has been driven by a few factors. One has been the reduction, in the loan book, and that's even more than offsetting for than, even more than offset by the the better pricing on the front book. But, overall, the impact remains negative. The other thing is the derisking that we have taken in the factoring and lending with regards to negative sentences.

39:28 So that there's an impact also on the net interest income, which you have seen there. I think it will be much lower in the the following quarters. Yes. And part of the of the releasing provision is precisely related to the retrofessions that we have been doing, which has had the negative impact on the part of the revenues of the factoring and lending, we have associated those provisions to partially offset those increased revenues. On the LPI, the 6% is a good number. It's not good enough, and we want to do better. But whether business that yields 6% with the public administration as counterparts, excluding LPI, is not a bad business proposition.

40:28 I don't think you can and should assume that the net interest income is two third maturity commissions and, sorry, two third, maturity commissions and one third LPI. That's for a variety of, of reasons. It's because the API also impacts negatively our interest income for the rescheduling, but also the impact of the back book, is not negligible. On the other hand, we do collect FTIs. Yeah? 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 LTI in our net interest income.

41:31 Hope Yeah. Yeah. Thank you. No. Thank you. Very clear. The next question comes from Sharada Patel with Citi. I have three. So the first one, coming back on the deposits. I know you've had a number of inflows. But have any other depositors started or said their intention to exit, started the process 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. Have you sounded out investors already? And how do you view the current market conditions?

42:19 And then my last question is, could you just explain in a bit more detail, when you point to the potential valorization of assets? Thank you. No. Thank you. Thank you for the questions. I think on deposits, I've said, probably most of the things to be to be said. We had this one client which communicate to bank two years ago that they wanted to exit. Some client has gone out. Some clients has gone in, and more are coming in in July and August. So that's, that's good in depositary bank. On the contractual exit rating, it is a topic which does not, get too much of my attention in the sense that clients are always, or almost always, free to leave, and they have not left.

43:20 And when they leave, as the case of this client which I communicate, which I talked about a few moments ago, it takes a relatively long time. But, anyways, we are not we are not seeing that. On the issuance of of bonds, I think we are now leaving for the holidays. I hope to do a bit of holidays now. We'll see what happens what when we come back or later if, we want to wait. You asked also a question about, valorization of assets. I think I mentioned that we may consider, apart from the securitization, also small disposals if done at the right terms for the firm.

44:14 The next question comes from Stephane Soucher with Bank of America. Go ahead. Thank you for taking my question. Three questions at my end. A follow-up on calendar provisioning. If I triangulate this EUR85 million of calendar provisioning for Q2 to get to 100% coverage, you would suggest an extra calendar provisioning in Q2 next year of EUR 200,000,000. 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? Secondly, you mentioned you need to rethink the bank, you need to rethink the factoring business. Could you expand on what that means? Does it entail, for instance, more regular usage of securitization, for instance?

45:10 And lastly, in terms of issuance, sorry, I understand, obviously, we go into the holiday season, but how do you think about your MREL 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 or do you think about this refinancing? Thank you very much. Thank you, Stefan, for your questions. So I don't want to run into debate about math, but if 85 is 35%, the 65 is not 200,000,000, is much less. Second, that assumes that we do no collection, And we do collect. That's why we showed the slides, going from 400 to 140.

46:08 On the bonds, you know, I don't like to be at the level of capital I am now. We want to be higher, and that's why we are working on the options we are working on. There was another question for Stefan, which I missed. If you could repeat that for me? Yes. Of course, missus. Yeah. So my my last question was really around the factoring business. You you suggest the bank is going to rethink the factoring business, and I just like to if you could expand what that means effectively. Thank you. Yes. I think the key issue of, our business model, is very simple given the reclassification of March, which is the fact that LTI stay on our balance sheet for two thousand four hundred days on average.

47:05 And that means that they will, by definition, go in calendar, and they continue to generate a high level of pass through. That's the path we need to deal with. What is the best way to deal with? You know, it could be a recurring securitization, could be a partner to buy forward flows of LPI when they become past due. 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. And we don't have to rush Okay. Be we don't have to rush because think our calendar provisioning is not above 200,000,000, and that that excludes any capital generation and the leveraging that we can do with little harm to the business.

48:04 Thank you, Mr. The next question comes from Domenico Maggio with Jefferies. Please go ahead. Hello, evening. So I have three questions. You mentioned the potential sale, of a Tier two. I was wondering at what level does the Tier two work on your side? 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 lead is going to lead to a mark to market of this portfolio, on capital going forward?

48:51 And, sorry to come back to the calendar provisioning, but, don't you have, an impact from the €1,300,000,000 reclassified at full year 2025, which supposedly, from the EBA Q and A should come two years after. So I would have thought that Q4 twenty twenty seven, like, basically, you have to provision to bring provisioning at 35% on those 1,300,000,000. Yeah. Those are my three questions. Thank you, Domenico. The tier two, no. I don't have a level in mind, but whatever level investors have in mind is too expensive for me. So we'll have to find a middle point. On the HTC mark to market, no. Don't see the risk.

49:38 There is no level above which that becomes mark to market. On the calendar, yes, we 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 will 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 million already already now. And, as I said, during the months, 35% of that number is coming from fall Poland, which we can manage relatively quickly. I don't want to make things look easy because I know things are not easy.

50:28 There is a path which we can solve more quickly, and there is a path like the LPI on which we have to study solution. But, absolutely, there will be an impact from reclassification. It's in our numbers, and we don't see capital breaches in 2027. 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. We would have Am I totally off? We would have would have said so in the press release. Okay. Thank you. Thank you.

51:16 As a reminder So I okay. Sorry. I thought it was done. As a reminder, if you have a question, please press Mr. Sika, back to you for any closing remarks. We don't have any other questions registered. 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 value roadshow that we keep doing, and we are always happy to see investors. Thank you. The conference has now concluded.

52:03 Thank you for attending today's presentation. You may now disconnect.