Consolidated Half-Year Financial Report at 30 June 2024
Desio, 30 July 2024
Half-Year Financial Report at 30 June 2024 | Page 1
Summary
Officers (Banco di Desio e della Brianza S.p.A.) | 3 |
The Banco Desio Group | 4 |
Introduction | 5 |
Interim Report on Operations at 30 June 2024 | 6 |
Summary data and relevant balance sheet, income statement, risk and structure | |
ratios | 7 |
Macroeconomic scenario | 9 |
Distribution channels | 13 |
Significant corporate events during the period | 15 |
Human Resources | 19 |
Operating performance | 21 |
Performance of consolidated companies | 45 |
Other information | 52 |
Outlook and main risks and uncertainties | 54 |
Condensed consolidated half-year financial statements at 30 June 2024 | 55 |
Financial Statements | 56 |
Notes | 64 |
Drafting criteria and accounting standards | 65 |
Information on fair value | 109 |
Main balance sheet and income statement aggregates | 119 |
Information on risks and related hedging policies | 172 |
Business combinations involving businesses or business units | 205 |
Related party transactions | 209 |
Payment agreements based on own equity instruments | 214 |
Segment reporting | 218 |
Certification of the Condensed half-year financial statements pursuant to article 81-ter | |
of Consob Regulation No. 11971 of 14 May 1999 | 221 |
Auditor's Report | 223 |
Annex - Consolidated income statement - quarterly development | 226 |
Half-Year Financial Report at 30 June 2024 | Page 2
Officers
(Banco di Desio e della Brianza S.p.A.)
Board of Directors
APPOINTED BY THE SHAREHOLDERS' MEETING OF 27 April 2023 | |
in office until the approval of the financial statements at 31.12.2025 | |
Chairman | Stefano Lado |
Chief Executive Officer and General Manager | Alessandro Maria Decio* |
Directors | Graziella Bologna* |
Valentina Maria Carla Casella | |
Paola Bruno | |
Agostino Gavazzi* | |
Tito Gavazzi | |
Alessandra Maraffini | |
Laura Tulli | |
Gerolamo Gavazzi* | |
Folco Trabalza (appointed meeting 18 April 2024) | |
* Members of the Executive Committee |
Board of Statutory Auditors
APPOINTED BY THE SHAREHOLDERS' MEETING OF 27 April 2023 | |
in office until the approval of the financial statements at 31.12.2025 | |
Chairman | Emiliano Barcaroli |
Statutory Auditors | Rodolfo Anghileri |
Stefania Chiaruttini | |
Alternate Auditors | Stefano Antonini |
Silvia Re | |
Erminio Beretta | |
General Management | |
Chief Executive Officer and General Manager | Alessandro Maria Decio |
Financial Reporting Manager as per Article 154-bis TUF
Financial Reporting Manager | Mauro Walter Colombo |
Independent Auditors
Independent Auditors | KPMG S.p.A. |
Half-Year Financial Report at 30 June 2024 | Page 3
The Banco Desio Group
The scope of consolidation of the Banco Desio Group at 30 June 2024 includes the following companies:
Dynamica Retail S.p.A. ("Dynamica Retail") and its subsidiary Dynamica Retail Agenzia in Attività Finanziaria S.r.l. ("Dynamica Agenzia") are included in the scope of consolidation as of 1 June 2024, following the completion of the strategic agreement whereby Banco Desio acquired 89.23% of the share capital of Dynamica Retail.
Half-Year Financial Report at 30 June 2024 | Page 4
Introduction
This Consolidated Half-Year Financial Report of the Banco Desio Group, consisting of the Interim Report on Operations and the Condensed Half-YearFinancial Statements, has been prepared pursuant to Article 154-ter of Legislative Decree No. 58/1998 ("Testo Unico della Finanza" - Consolidated Law on Finance), implementing Legislative Decree No. 195 of 6 November 2007 (so-called "Transparency Directive"), including for the determination of half-year profit for the purposes of calculating Own Funds, and is prepared in accordance with the applicable international accounting standards recognised in the European Community pursuant to EC Regulation No. 1606 of 19 July 2002, as more specifically indicated in the chapter "Drafting criteria and accounting standards".
In particular, the Consolidated Half-Year Financial Report is prepared in accordance with IAS 34 - Interim Financial Reporting, as well as the provisions of the Bank of Italy issued in Circular No. 262 of 22 December 2005 and subsequent updates.
The data and ratios included in the Interim Report on Operations, where traceable, refer to the Balance Sheet format of the Condensed half-yearfinancial statements as well as to the reclassified Income Statement, as per the specific paragraph, which in turn was prepared starting from the Income Statement format of the Condensed half-yearfinancial statements.
The balances shown in the financial statements and in the related detailed tables for the reference period express the effects deriving from the acquisition of Dynamica Retail S.p.A., as well as of its subsidiary Dynamica Retail Agenzia in Attività Finanziaria S.r.l., including those arising from the Purchase Price Allocation (PPA) process provisionally determined at the acquisition date (1 June 2024) pursuant to IFRS 3 Business Combinations.
Furthermore, it is noted that with reference to the balance sheet and income statement values compared at 31 December 2023 and 30 June 2023, respectively, the balances shown include the effects deriving from (i) the acquisition of the branches BU from the BPER Group, realised on 20 February 2023, including those deriving from the Purchase Price Allocation (PPA) process pursuant to IFRS 3 Business Combinations and (ii) the sale to Worldline Italia of the merchant acquiring business unit, which took place on 28 March 2023.
The economic values used for comparison have been restated due to the change in the amortised cost criterion applied by the subsidiary Fides in order to make it consistent with that adopted by the Parent Company.
In defining the contents of the explanatory notes, account was also taken of the indications of Consob Note of 27 October 2023 relating to the ESMA document "European common enforcement priorities for 2023 annual financial reports" of 25 October 2023, insofar as applicable.
The specific disclosure dedicated to the description of the macroeconomic context in which this financial disclosure was prepared, characterised by the persistence of international geopolitical crises and the residual effects of the Covid-19 epidemic, as well as the uncertainties and significant risks resulting therefrom, is provided in the paragraph "Risks, uncertainties and impacts arising from international geopolitical crises, residual effects of the Covid-19 epidemic, climate risk and the macroeconomic context" (page 72); the consequences on the economy in general and on economic-financial performance in future years remain uncertain in relation to the possible evolutions of future scenarios that are outside the control of management.
This Consolidated Half-Year Financial Report is subject to a limited audit by KPMG S.p.A.
Half-Year Financial Report at 30 June 2024 | Page 5
Interim Report on Operations at 30 June 2024
Half-Year Financial Report at 30 June 2024 | Page 6
Summary data and relevant balance sheet, income statement, risk and structure ratios
The alternative performance indicators (APIs) presented in this Report have been identified to facilitate understanding of Banco Desio Group's performance. APIs are not required by international accounting standards, represent supplementary information with respect to the measures defined under IAS/IFRS, and are in no way a substitute for them.
For each API, evidence of the calculation formula is provided, and the quantities used can be inferred from the information contained in the relevant tables and/or reclassified financial statements contained in the "Results" section of this Report.
These indicators are based on the European Securities and Markets Authority (ESMA) guidelines of 5 October 2015 (ESMA/2015/1415), incorporated in Consob Communication No. 0092543 of 3 December 2015. Adhering to the indications contained in the update of document "ESMA 32-51-370 - Questions and answers - ESMA Guidelines on Alternative Performance Measures (APMs)", published on 17 April 2020, no changes were made to the APIs and no new ad hoc indicators were introduced to separately highlight the effects of international geopolitical crises and the Covid-19 epidemic.
Balance sheet values
Amounts in Euro thousands | ||||||
Total assets | ||||||
Financial assets | ||||||
Cash and cash equivalents | (1) | |||||
Loans with banks | (2) | |||||
Loans to customers | (2) | |||||
Tangible assets | (3) | |||||
Intangible assets | ||||||
Non-current assets and groups of assets held for sale | (4) | |||||
Payables to banks | ||||||
Payables to customers | (5) (6) | |||||
Securities issued | ||||||
Equity (including Profit for the period) | ||||||
Own Funds | ||||||
Total indirect inflows | ||||||
of which Indirect inflows from ordinary customers | ||||||
of which Indirect inflows from institutional customers |
30.06.2024
18,313,639 4,234,094 1,180,377 353,072 11,649,957 231,448 41,262 14,537 1,056,218 12,488,789 2,826,982 1,396,027
1,396,587
21,201,749 13,426,599 7,775,150
31.12.2023 | Changes | |
abs. | % | |
18,555,255 | -241,616 | -1.3% |
3,957,354 | 276,740 | 7.0% |
1,655,187 | -474,810 | -28.7% |
343,818 | 9,254 | 2.7% |
11,653,626 | -3,669 | 0.0% |
230,994 | 454 | 0.2% |
41,619 | -357 | -0.9% |
0 | 14,537 | n.s. |
1,950,065 | -893,847 | -45.8% |
12,277,411 | 211,378 | 1.7% |
2,509,819 | 317,163 | 12.6% |
1,354,015 | 42,012 | 3.1% |
1,366,391 | 30,196 | 2.2% |
20,075,207 | 1,126,542 | 5.6% |
12,683,669 | 742,930 | 5.9% |
7,391,538 | 383,612 | 5.2% |
- At 30 June 2024, Cash and cash equivalents included the current accounts, demand deposits and the amount on demand of Euro 1.1 billion relating to cash in excess of the commitment to maintain the compulsory reserve, invested in overnight deposits (Euro 1.5 billion at the end of the previous period).
- pursuant to Circular 262, the balance of the financial statements item includes Held-to-collect (HTC) debt securities recognised at amortised cost, which are shown under financial assets in these summaries, and does not include current accounts and demand deposits recognised under Cash and cash equivalents.
- the balance of the item at 30 June 2024 includes the right of use (RoU Asset) amounting to Euro 56.4 million in respect of operating leases falling under the scope of IFRS16 Leases, which came into effect as of 1 January 2019.
- the balance of the item at 30 June 2024 consists of NPL loans for which assignment contracts had been signed but not yet finalised.
- the balance of the item does not include the liability recognised in the item Payables to customers in the financial statements in respect of operating leases falling within the scope of IFRS16.
- Including inflows repurchase agreements with institutional customers in the amount of Euro 971 million (Euro 608 million at 31 December 2023).
Income statement values (7)
Amounts in Euro thousands Operating income of which Net interest income Operating expenses Result from operations Charges related to the banking system Current result after taxes Non-recurringresult after taxes Profit (loss) for the period
- from Reclassified Income Statement.
30.06.2024
314,373 192,147 162,127 152,246 6,855 76,545 1,347 78,088
30.06.2023 | Changes | |
abs. | % | |
274,003 | 40,370 | 14.7% |
168,585 | 23,562 | 14.0% |
148,840 | 13,287 | 8.9% |
125,163 | 27,083 | 21.6% |
6,798 | 57 | 0.8% |
59,159 | 17,386 | 29.4% |
134,186 | -132,839 | n.s. |
193,345 | -115,257 | -59.6% |
Half-Year Financial Report at 30 June 2024 | Page 7
Equity, economic and risk ratios
30.06.2024 | 31.12.2023 | Changes | |
abs. | |||
Equity/Total assets | 7.6% | 7.3% | 0.3% |
Equity/Loans to customers | 12.0% | 11.6% | 0.4% |
Equity/Payables to customers | 11.2% | 11.0% | 0.2% |
Equity/Securities issued | 49.4% | 53.9% | -4.5% |
Common Equity Tier1 (CET1)/Risk-weighted assets (8) (9) | 17.6% | 17.2% | 0.41% |
Total Tier 1 capital (T1)/Risk-weighted assets (8) (9) | 17.6% | 17.2% | 0.41% |
Total Own funds/Risk-weighted assets (Total capital ratio) (8) (9) | 18.4% | 18.0% | 0.41% |
Financial assets/Total assets | 23.1% | 21.3% | 1.8% |
Loans with banks/Total assets | 1.9% | 1.9% | 0.0% |
Loans to customers/Total assets | 63.6% | 62.8% | 0.8% |
Loans to customers/Direct inflows from customers | 76.1% | 78.8% | -2.7% |
Payables to banks/Total assets | 5.8% | 10.5% | -4.7% |
Payables to customers/Total assets | 68.2% | 66.2% | 2.0% |
Securities issued/Total assets | 15.4% | 13.5% | 1.9% |
Direct inflows from customers/Total assets | 83.6% | 79.7% | 3.9% |
30.06.2024 | 30.06.2023 | Changes | |
abs. | |||
Operating expenses/Operating income (Cost/Income ratio) | 51.6% | 54.3% | -2.7% |
(Operating expenses + Banking-related expenses)/Operating income (Cost/Income ratio) | 53.8% | 56.8% | -3.0% |
Net interest income/Operating income | 61.1% | 61.5% | -0.4% |
Result from operations/Operating income | 48.4% | 45.7% | 2.7% |
Current result after taxes/Equity - annualised (10) (11) | 12.0% | 10.0% | 2.0% |
Profit for the year/Equity (10) (R.O.E.) - annualised (11) (12) | 12.1% | 21.6% | -9.5% |
Current result before taxes/Total assets (R.O.A.) - annualised (11) | 1.3% | 0.9% | 0.4% |
30.06.2024 | 31.12.2023 | Changes | |
abs. | |||
Net bad loans/Loans to customers (13) | 0.5% | 0.4% | 0.1% |
Net non-performing loans/Loans to customers (13) | 1.8% | 1.7% | 0.1% |
% Cov erage of bad loans (13) | 69.7% | 69.6% | 0.1% |
% Cov erage of bad loans before write-offs(13) | 70.0% | 69.9% | 0.1% |
% Total cov erage of non-performing loans (13) | 48.6% | 48.8% | -0.2% |
% Cov erage of non-performing loans before write-offs(13) | 48.8% | 49.0% | -0.2% |
% Cov erage of performing loans (13) | 0.92% | 0.97% | -0.05% |
Structure and productivity data | |||
30.06.2024 | 31.12.2023 | Changes | ||
abs. | % | |||
Number of employees | 2,488 | 2,391 | 97 | 4.1% |
Number of branches | 273 | 280 | -7 | -2.5% |
Amounts in Euro thousands | ||||
Loans to customers per employee (14) | 4,776 | 5,172 | -396 | -7.7% |
Direct inflows from customers per employee (14) | 6,278 | 6,563 | -285 | -4.3% |
30.06.2024 | 30.06.2023 | Changes | ||
abs. | % | |||
Operating income per employee (14) - annualised (11) | 256 | 258 | -2 | -0.8% |
Result from operations per employee (14) - annualised (11) | 123 | 116 | 7 | 6.0% |
- Consolidated equity ratios calculated for Banco Desio. The ratios referred to the prudential superv isory scope of Brianza Unione at 30 June 2024 are: Common Equity Tier1 12.5%; Tier 1 13.3%; Total Capital Ratio 15.2%.
- Equity ratios at 30.06.2024 are calculated in application of the transitional prov isions introduced by EU Regulation 2017/2395; ratios calculated without application of these prov isions are as follows: Common Equity Tier1 17.5%; Tier 1 17.5%; Total capital ratio 18.3%.
- net of the result for the period.
- the 2023 year-end figure at 30.06.2024 is shown.
- the annualised ROE at 30.06.2024 does not consider the annualisation of the Net non-recurring operating result.
- net of Assets held for sale with reference to 30.06.2024.
- based on the number of employees as the arithmetic mean between the period-end figure and the prev ious year-end figure.
Half-Year Financial Report at 30 June 2024 | Page 8
Macroeconomic scenario
The macroeconomic framework
International Scenario
The first quarter of 2024 confirmed the resilience of the world's major economies. As expected, US GDP slowed down (+0.4% vs +0.8% in the fourth quarter of 2023), although annual growth remained strong (+3%). In the Euro Area, on the other hand, GDP accelerated more than expected (+0.3% vs. - 0.1% in the fourth quarter of 2023) due to improved growth in all major countries. China's GDP grew by +5.3% year-on- year, broadly in line with the fourth quarter of 2023.
Inflation is falling more slowly than desired/expected almost everywhere in the world economy, along a bumpy path. The Federal Reserve Bank and the European Central Bank, as well as many other central banks, are waiting for clearer signals on the path of convergence of inflation to the price stability objective before embarking decisively on easing monetary conditions, in order to minimise the risk of new inflationary flare-ups (and subsequent tighter restrictions) in the event of too early an intervention.
In May, the consumer price index stabilised in the US at 3.3%, while in the Euro Area, the estimate for June shows inflation at 2.5%, broadly stable since February due to the gradual reduction of the negative contribution of energy products. In China, inflation remained around zero, suggesting continued weakness in domestic demand.
Political dynamics are a source of great uncertainty: the international scenario is dominated by the expectation of the outcome of the US presidential elections in November.
In Europe, the French and German governments emerged weakened by the outcome of the European elections. The implication is that the Franco-German axis will increasingly struggle to be the traditional driver of European decisions. Markets reacted nervously to this possibility, the euro depreciated slightly and yields on government bonds of high debt countries rose. Political fragilities could complicate important choices for the future of the area. Indeed, important decisions are piling up for the coming months. While the G7 recent decision to extend a USD 50 billion loan to Ukraine financed by interest on Russia's assets held predominantly in the EU has found a solution for the time being, the position to be taken by the EU with regard to trade relations with China, as well as the further progress to be made in the integration process (capital market union, completion of the banking union), are much less shared among the various member states.
In this macroeconomic context, the Italian economy is also stalling. The high level of accumulated savings and good employment performance cushion the negative impacts of inflation and high interest rates for the time being, as well as those of the cooling of the construction sector and delays in the implementation of the PNRR. In the context of these restrictive impulses, the current stagnation of the Italian economy can be considered a relatively positive result. Looking ahead, available indicators point to a weakness in consumption, squeezed by inflation, and investment, held back by uncertainty and higher financing costs. The support for low and medium incomes provided by the decontribution and Irpef reform measures contained in the manoeuvre is likely to be limited, while the revision of the PNRR agreed with the European Commission does not envisage substantial changes in terms of expenditure and support for the economy compared to the previous version. After an expected GDP growth of 0.6% in 2023, the most recent projections for 2024 maintain the positive dynamic, however with a more moderate growth of around 0.4%.
Half-Year Financial Report at 30 June 2024 | Page 9
United States
The economy slowed at the beginning of the year with a 0.35% change in GDP compared to the previous quarter and 0.8% in the fourth quarter of 2023. This slowdown was mainly due to lower domestic spending, except for residential investments, and the negative contribution of real net exports (-0.25%). A "soft- landing" is expected for the economy, despite the slow decline in inflation and the risk of a strengthening of price/wage effects.
The labour market remained robust, with 170 thousand new jobs created in April and a strong expansion in demand in May with over 270 thousand new jobs. The growth of hourly wages (4.2%) exceeds that of consumer prices (3.3%), providing households with an increase in nominal disposable income of 4.3% in the first quarter of 2024.
Inflation was 3.2% in May, with the largest contribution from figurative leases. The risk of a new real estate cycle could mitigate the decline in real estate prices observed in 2022. The pace of GDP growth is expected to stabilise in the second quarter of 2024, with a "soft-landing" of the economy evident in 2025 (1.8%) after an average annual growth in 2024 similar to that of 2023 (2.3% vs. 2.5%).
Japan
Japan's GDP contracted by 0.7% in the first quarter of 2024, with declines in all the main demand components: consumption (-0.8%), investment in machinery and equipment (-0.4%) and exports (-5.1%), the latter caused by the weakness of global demand, especially from Europe and Asia. Exports also continued to decline in the first months of the second quarter, affecting the manufacturing industry. However, the PMI shows an improvement in the domestic situation, exceeding the 50 level due to stable production and domestic demand. Producer prices rose, prompting companies to revise their price lists upwards, and inflation reached 2.5% in April. The end of electricity and gas subsidies could accelerate price increases. The yen exchange rate stabilised below 160 yen per dollar, encouraging further inflationary pressures.
Spring wage bargaining may have increased inflation, leading the Central Bank of Japan (BOJ) to a possible rate hike after abandoning its negative rate policy in March. Despite the gradual rise in long-term rates, monetary policy will remain expansionary to foster the recovery of the yen and support consumption and investment. However, economic growth remains weak and subject to geopolitical risks, particularly concerning China, an important market for Japanese exports.
Emerging economies
China's GDP in the first quarter of 2024 increased by 1.6% compared to the previous quarter and 5.3% compared to the same period last year. However, leading indicators point to a widespread slowdown in the economy. Industrial production declined in growth to 5.6%, as did gross fixed capital formation, which recorded a positive change in January-May of 4%, mainly supported by state-owned enterprises. Private investment, on the other hand, remained stagnant due to several factors: on the one hand, the strong deceleration in terms of investment growth in the automotive and high-tech sectors; on the other hand, the negative effect from the real estate sector, which continues to weigh on the entire economic system.
In addition to this, the figures for goods transport and consumption were also down, the latter growing by 3.7% for retail sales, which is not positive considering the presence of incentives that could therefore mask greater weakness. Inflation remains close to zero, with import prices rising slightly and producer prices falling, suggesting a prolonged period of low inflation. In contrast to the data so far, the PMI indicators are characterised by greater optimism, with the manufacturing sector at 51.8 and the services sector at 51.7.
Half-Year Financial Report at 30 June 2024 | Page 10