Good morning, ladies and gentlemen. A very welcome from all BFF management team. It is a great pleasure to have you with us today to the presentation of our 2028 strategic update and 2026 financial targets. We are very numerous this morning. Some of you are here with us in London, some of you are connected with our conference call. I'd like to give you a few details on the agenda. Massimiliano Belingheri, our Group CEO, will start the conference with the key highlights, which will take approximately 30 minutes, followed by a section on the business, led by Michele Antognoli, Vice President, Factoring & Lending, and Enrico Tadiotto, Vice President, Transaction Services. This section will take approximately 40 minutes.
Piergiorgio Bicci, our Group CFO, will take you through the balance sheet management, sustainability path underpinning our business and 2026 financial targets. Massimiliano Belingheri will close the event with the closing remarks at approximately 11, thereafter, the Q&A session will be open. As to questions, we will start with you here in present in London. Just raise your hand and we will pass you the mic. We will continue with those of you that are connected via conference call. To register the questions, you have to press the star key, followed by zero on your telephone. I think it is all from my side. Thank you again for being with us today. I leave the floor to Massimiliano Belingheri.
Thank you. Thank you, Caterina. Thank you, everybody, for being here. Thank you, Caterina and Alessio, for organizing this event and also making sure that the weather outside is horrible so that you are forced to be here with us today, and also for the people outside, not to listen to us from a park. Jokes aside, it's an exciting moment for us to present our 2028 strategy and the 2026 financial targets. The world around us has changed, and I think it's the right moment to take stock on where we are as a company and the future ahead of us. To do that, I think it's worth starting to recap who we are, what we do, the foundation of our, of our success, and why we think we are uniquely positioned to actually succeed in this new environment.
We also always pride ourselves to be a bank like no other, and we truly are. Although we have a banking license, what we really do at our core is to be a specialized and trusted service provider for our customers, who are companies or other financial institutions. We're a bank different from others by nature. We are specialized, agile, entrepreneurial. By opportunity, we have a large addressable market, which is, to a very large extent, untapped. We are the leader in the niches where we operate. We've been able to execute M&A opportunistically, where we saw value and the ability to diversify our business.
Importantly, we're very different from other banks in terms of results, with a long-term return on tangible equity, which is substantially above the cost of capital, strong capital generation, and ability to reward our shareholders with both growth and cash, and importantly, from a risk perspective, no exposure to the credit cycle. We are a leading bank, specialized in B2B relationship, and we really have two focus in our business. One, is to be the leader in European factor and lending towards public entities. Second, we are a second-level bank, which provides services, in intermediary banking payments on one side, and we are the only Italian provider of security services, to which we will go in a second. We operate across Europe.
In that respect, also, we are quite unique in nine countries with our Factoring & Lending business, an additional three with our deposit-gathering capabilities. We also have a great value creation story that we are proud of. The company was founded almost 40 years ago with, roughly a quarter of a million EUR of invested capital. Our market cap today is EUR 1.8 billion. We've returned over EUR 1 billion of cash to the shareholders, of which EUR 600 million after the IPO, roughly three quarters of the IPO value has been redistributed to the shareholders. A great success from the founding of the company to the IPO and from the IPO to today.
It has been consistent over time. Since 2013, when we got the banking license, we've been able to actually grow at significant pace our net income consistently over time. We had EUR 84 million when we listed, and our targets for this year are between EUR 180 million-EUR 190 million. Substantial growth, as you will see, in a challenging market environment, which has now shifted. This has resulted in very attractive returns to our shareholders, which have made 25% return on the investment they've done at the IPO, if you include dividends compounded through that period. That's driven by what we call superior execution. We are, if you look also at our latest business plan, the one we announced in 2021 with the acquisition of DepoBank, and the plan of that, we are ahead of those targets.
We have reached those targets one year ahead. It's driven by a strong focus on our businesses, a strong management team, as you will see, a strong team overall, and the attractiveness of the markets where we operate. This is where we have been, and in a summary, also where we want to be. Where we want to be is to remain leader in specialty finance. We, with a unique value proposition in our reference markets, with a high specialization, a sustainable bank like no other, as we've always been. The mission has not changed compared to the 2023 business plan, which we announced in 2021. Operating with honesty and transparency, respecting and valuing people, maintaining leadership innovation, customer services, and execution in our reference markets, maintaining a low-risk profile and high operational efficiency.
That's where we are, where we have been, but in looking ahead, we should look at what is the opportunity for us, I would say it's synthesized in a word, which is growth. It's growth in revenues, earnings per share, and return on tangible equity, underpinned by context, which is very favorable for us, a favorable macro context, but also favorable, market in terms of, niches where we operate with unexploited opportunities. We will be able to capture those opportunities through the characteristics of our organization, a good operating leverage across our division, a diversified funding which we have built over the years, an embedded profitability comes from our unique revenue model in Factoring & Lending, low credit risk given our exposure to the public sector, a disciplined M&A strategy, which we have consistently applied over the years.
A sustainable business, which is not only financially sustainable, but sustainable in the community where we operate, in the environment that is around us, in the governance of one of the few public companies in the Italian markets. A team which is strong, diverse, and has been growing and which we are very proud of, and a team which is also strongly aligned in terms of incentives to shareholders, which we think is a cornerstone of delivering value to our stakeholders. Let me go through one by one, these elements. First of all, we've entered truly a very different market environment, which is strongly favorable for our business.
If you look back to the last few years, the previous two strategic plans, the external market context has been actually quite challenging for a business that provides liquidity, protection against a delay in payment from the public sector, and generally, with a lot of, with negative interest rates and therefore a lot of pressure on who provides financing to the markets. That has changed dramatically over the last year, therefore, the external environment that we are facing is actually, we think, full of tailwinds for a change. Why? Because there's less liquidity, and companies are finding it more difficult to access finance, even the large companies which are the bedrock of our business.
Positive interest rates after such a long spell of negative or zero rates are very positive for us, since we charge two interest in our Factoring & Lending business, and they should drive substantially our growth in the next few years. Inflation is a positive because we actually have a very low cost income, and therefore it impacts us very little on the cost side, but we buy on the Factoring & Lending business nominal invoices, and therefore, the volumes are expected to grow driven by that. We have more public expenditure, particularly around investment, post-COVID. We have a legislative framework which is stable or favorable. We don't have a new definition of default coming on board. The split payment is expected to disappear, or it's not yet in fully in our numbers.
Importantly, the review of the Late Payment Directive is going in a direction which will be neutral or favorable to us. Finally, in this different environment, we expect DSOs potentially to increase, driving further the business. The reason is simple actually. DSOs are driven by the administrative complexity of the public administration. That's why actually they remained beyond the target level of the European Directive, but also driven by the health of public finances. When interest rates go up, historically, we have seen DSOs also going up. As you see, there, that's also what has happened, at least in Italy last year. Now, it's an uptick. We don't know if it's a trend. We are not planning for an uptick, a substantial uptick, but clearly an upside potential for our business after many years of stability or decline.
If you look at the growth opportunities across our businesses, the second pillar is that we operate in niches where we have untapped potential. Largely in Factoring and Lending, where we are facing a EUR 1 trillion market opportunity in terms of yearly receivables that the public administration generates, and where only a small portion of those receivables are actually factored no recourse. Secondly, in payment, we are exposed to the shift from electronic, from cash to electronic payments, and also the issue for banks of managing their legacy payment system, which provides opportunity for us to grow and to expand our services.
In funding and security services, the higher nominal level of returns should drive more asset accumulation and more opportunity to us, and specifically, there's also transition in Italy, for a class of pension funds, that we need to have services like the one we provide, and provide plenty of opportunity for us to grow. A great market backdrop, and we are positioning niches of business where we can grow. How we are gonna capture this opportunity? First of all, operating, with an efficient cost base, we have demonstrating high operating leverage across our division in the years. We've invested heavily in our business, in the last few years. We expect that actually growth will disproportionately come to the bottom line through a continued increase in our operating leverage.
Importantly, in a world where funding and liquidity has become more of a focus for any financial institution, in the last years, we've been able to diversify our funding sources massively, through the acquisition of our Transaction Services business, which provides us plenty of operational deposits. The fact that we have kept and developed further our deposit gathering machine, which now operates in Italy, Spain, Poland, and through a third party distribution, also in Germany, the Netherlands, and Ireland. Because we've kept open also other revenue of funding, the bond market and the interbank market, which can provide plenty of opportunity to grow. By having diversified, we're now in a pretty healthy position in terms of taking advantage of the growth ahead.
Our loan to deposit ratio is 75%, actually much better than before the acquisition of BPER Banca. That gives us plenty of buffer to continue to grow our balance sheet, our loan book, more than our balance sheet, as Giorgio will explain, in the years ahead. Unique feature of our business is also that we have plenty of value, which is embedded in it, that is deferred over time. As many of you know, we book only half of what we have the right to collect in terms of late payment interest and recovery costs towards the public administration, which gives us over half a billion euros of balance sheet reserve, a large portion of which will come through our PNL in the year ahead.
That not only is a substantial deferred income that we, that we will see coming through the PNL in the next few years, but it's also an amount which we continue to compound, given the higher level of interest rates. It's a significant protection to our PNL and significant source of value and capital going forward. Importantly, in an uncertain macro environment, we have remained focused on our low risk business model. That's something which is important to realize, we're not a bank exposed to the normal credit cycle of other financial institutions. We have 95% of our loan book which is exposed towards the public administration.
We have an average cost of risk, including generic provision of less than 10 basis points since the IPO, and cumulative credit losses in our core factoring business of EUR 6.2 million over the last 16 years. Basically zero cost business. We continue to look at opportunities to use M&A to grow our business in our core verticals and the adjacent sectors, also practically to diversify as we've done successfully with the acquisition of BPER Banca. We want to maintain a low risk profile, leverage our unique competencies, we look at M&A as something that might happen, we can't predict it, but certainly another source of value that we've demonstrated to be able to deliver. We think we have a strong business, uniquely placed to succeed, and also uniquely placed to have a positive impact in the society around us.
We've worked quite hard in a BFF way to focus on tangible targets for our environmental impact with a big shift of our workforce and working in green buildings, the reduction on our consumption, so to have less of an impact from an environmental point of view in our in our operations. We remain strongly committed to our social impact, both with our team and with the community around us. A strong focus on diversity, which is not only male and female, but there's also for a business which operates internationally, the ability to bring the best talent, wherever it is, with a lot of investment in training, a strong alignment and a distribution of value, also to the employees that are creating value for the shareholders, and investment in our social impact, foundation.
From a governance point of view, also, we pride ourselves to be at the forefront of good governance. We have, actually, I think the only bank that has presented a slate of the board of directors directly, and we're really striving to be the best public company it can be in our market. That has been recognized by also the external rating agencies, which has given us a low risk or high rating in terms of sustainability. It would not be possible if we didn't have a very strong team. Actually, let me take the opportunity to thank all the employees in the company, but also the management team for the success that has been done, and also for the work put in this business.
I think, again, uniquely, we haven't built the business plan with support of external consultants, it's been really a bottom-up exercise, which will drive the thinking and the execution of the business going forward. It's a strong team, which is well-balanced across markets, geography, gender, experiences. It's a management team which is exceedingly strong, which has been together, for a number of years, but also come from very different experiences, is young, motivated, and I think is the really the bedrock of our success. It's also a team which is strongly aligned with shareholders, that's a unique characteristic, again, of a bank like no other as ours.
A team which has short-term incentives, which cover a large portion of the organization, which are linked, again, to shareholder value, and are mostly paid for the risk takers in shares. An important stock option plan, which we have been reissuing over time, that covers over 20% of our workforce, which I think is unique in the financial services, in the financial services sector. Great team, motivated to lead what is really a true public company, with no controlling shareholders, good corporate governance, and the management team highly invested in the shares of the business, so sure alignment of incentives with the shareholders themselves. A great opportunity in the economic backdrop, great opportunity in the markets where we operate, we've invested a lot to be able to capture that.
I leave now to my colleagues, starting with Michele, to describe how we're gonna go about to succeeding that. Thank you.
Thank you, Massimiliano. Thank you for the participant of this meeting. Let me introduce. I'm Michele Antognoli, the vice president of the Factoring & Lending department. I'm here today to guide you to the section of the business plan that is dedicated to our business line. As Massimiliano was mentioning, is a business line that has in front of us a lot of opportunity for achieve and capture faster growth. In particular, we are competing in a market that accumulate 1 trillion EUR asset, 1 trillion EUR asset of public spend in the geographies where we operate. These are characterized by two factors.
The first factor is the fact that, in this market, we will expect an initial growth of this market, that will be driven by the surging inflation rate, by the dynamic that we see in the nominal GDP growth rate of the countries where we operate. Secondly, is a market that is usually under-penetrated by the factoring service versus the public administration receivables. This, for us, is a strong opportunity. This opportunity is the base of our business plan, and is the base of our journey. My role today is to guide you through this journey, and to show you how we can capture this growth. Let's go into the next slide. In this slide, we have listed here the three foundation elements of our successful business.
The first one, as I mentioned, is the fact of operating in a large, underpenetrated market that accumulate more than EUR 1 trillion of assets that are available, where the products of BFF is still under-penetrated in the market. The second one is the fact of operating with a very unique business model that allow us to have a high profitability level, thanks to the 2 source of interest income that we have, on one side from the customer and on the other side from the debtor. Thanks to the fact that we have a negligible credit risk, and the possibility to have a scalable business where the operating leverage can be faster explored. The third factor is the fact of competing in a market where we have an unmatched competitive advantage.
This has been built through the experience that we have had in those markets since 40 years, building a pan-European platform that makes that increase the loyalty of our customers, and makes more easy for us to enter also new market and scale the business even further. Let's go now to the first element, the market itself. If you see here, we have this EUR 1 trillion market, as I mentioned, that is underserved. Let's look to the left part of this slide, where we showed up that in the market where we operate, we have almost EUR 964 billion of public spend. This spend is based on 3 categories. One, is the intermediate consumption, the others is the contribution kind, and the third category is the CapEx, or public investment that the public administration is performing.
As you can see here, BFF has a less than 2% market penetration in the first category that I mentioned, and then a visible market penetration in the other two. There is the potential to grow also in the other categories. The second element, and the first element of our growth that is listed here, is the spend growth over the year of the plan. That year, we project at the 5% growth annual rate. This is based on the surging inflation rate that we have seen at the beginning of the presentation, plus the nominal GDP growth of the country where we operate. This is the first component of our growth, is the natural growth of the market at 5%, and the good part of it is that it's inertia.
The second part is the increase of the market penetration, what is listed here as number two, and this can be done across the various category of the spend of the public administration and across the various geographies where we operate. The third factor that we are listing here, and is not included in our numbers of the financial plan, is the possibility to increase and expand our geographical footprint and extend it to area of the European Union where we currently not operate. Here, we are listing Romania, Bulgaria, and Hungary as an example, but there are areas that could add possibility and opportunities for us. All in all, this is making a 10% annual growth in volumes that is our expected trend for our business line.
Going back, analyzing the opportunity that we have in increasing the market and penetration that we have in the markets where we currently operate, let's do an example on the Italian business. In the Italian business, as you can see it here, we are operating in 2 business line. The first business line, the National Health Care System business line, is our historical business line, where we are operating since 40 years. The second business line is the rest of the public administration spend, that where we are operating since 10 years, and where we have a lower market penetration. If we will be able to achieve the same market penetration that we have in the NHS system, that is 5%, and match this market penetration also in the public administration.
This is meaning getting EUR 2 billion of additional volumes in our asset in the next future. EUR 2 billion that are additional to the EUR 3.4 billion that we currently have, and this is a huge opportunity for us that we want to capture. Let's do the same reasoning also at the European level. At the European level, following the same reasoning, we can see that we have the famous EUR 964 billion spent at European level, and we have currently a market penetration that it's on average on all the countries, 0.4%. While in Italy, together, NHS and PA, BFF has a market penetration of 1.7.
In case we will be able in the future to accelerate our growth and achieve in all the market a 1.7 penetration, this will get to us EUR 9 billion of additional asset. This EUR 9 billion are accumulating with the EUR 7 billion that we currently have, so it's a very huge opportunity. How do we do that? We do that investing in the relationship that we have with customer and investing in the structure that we, on which we are operating. For instance, the opening of the branch in France could be a very huge driver for our growth. Let's go back to the second element of our foundation, of the foundation of our success, so the unique revenue generation model that we have in BFF.
Let's look to this slide. In our model, we have, being a factor, in the factoring business, we have, two customer, essentially. We have, on one side, the public administration provider, so the large multinational companies that they do provide services to our public administration, and then the public administration itself. This model is a model that is allowing us to have, first, a very scalable business, because the number of counterparts are limited, and are limited in terms of number of large customers that we have in the portfolio, and the other side, in the number of sectors that we have in our portfolio that we are managing. With this limited number, what we can do is that we can scale the business more easily.
The second element is the negligible cost of risk that Massimiliano was explaining earlier. Thanks to the fact that we are transferring all the exposure to the public administration, and being the public administration an entity that doesn't default by definition, this is giving us a very safe business with negligible cost of risk. The third component, the most important, is that our source of revenues are coming from two sides. On one side, there is the maturity commission that we charge to the assigner, so to our customer, that is an all-in fee that we charge, and then we discount from the face value when we acquire a portfolio. On the other side, the interest and the recovery rights that we charge to the public administration entities.
Those interest and recovery rights are based on the interest, on ECB rate plus 8%, and on the recovery rights on €40 for invoice. On our model, we accrue in our P&L only 50% of this value, and the rest is deferred for the future, and I will show you later the implication that this has. The base of this profitability and based on the late payment interest and recovery rights, is based and protected by the European Directive on late payment. This European Directive has been born in 2000, then reviewed in 2011, and then is undergoing a review in this in these days. The two elements that I want to flag about this regulatory framework are the following.
First of all, is a regulatory framework that is protected by the EU law. That means that no individual country or no individual debtors can change the rules of the games. Change the rules of the game is very difficult. The second element that I want to flag is that over the years, the EU has always had the same track. That means protecting, and enforcing the rights of the public administration provider in relationship to the terms of payment. We expect that this trend will keep going also in the future. Going back on the two sorts of revenues that our business model is giving us, you will see in this slide that we have, in our funds, actually more than EUR 1 billion of rights coming from the LPI and from the Recovery Cost Rights.
As I said earlier, just 50% of it has already been accrued in the PNL, and the rest has been deferred for the futures. That means that in the next period, in the next years, and in the years of the plan, part of this value will come through the PNL. Here, as an example, we are listing and estimating almost EUR 240 million that are going to come in the PNL in the next year. Those are based on the fact on set various component. The first component is related to the increase of the LPI rate from 8% to 12%. The second component is the over-recovery that usually we have in our business versus the accrued 50% value that we have in our balance sheet. This is valid for the recovery rights and for the 40 EUR.
This is an illustrative example, doesn't include the effect of the expected growth that we have and will have in the plan, meaning the growth of the LPI rate, that keep growing, meaning the growth of the volumes, and meaning the growth of the DSO, that as Massimiliano was saying, is expected to increase. The number of invoice could grow because we are able to target in the development of the plan, industries where the number of invoice are more important than on others. All in all, this is explaining the fact that we are operating a very unique and profitable business model with different value for the future. Let's go to the last section of our foundation, explain you what are the basis of the unmatchable competitive advantage that we have in our business.
The first base is the fact that we have a scalable business with negligible cost of risk. This is based on the fact that we are operating with large national and multinational provider of the public administration on one side, with the public debtors on the other side. We are transferring all exposure risk to the public administration. The second element is the fact that we have a very unique international pan-European platform that is operating actually in nine countries, and can be further explored, where we can add additional country with a very limited incremental cost. The last element is that we are having a very unique relationship with the public administration, meaning that the public administration entities for us are not customers, are only debtors. What does it mean, this?
It means that we haven't, we do not come across conflict of interest when we are collecting back the credits and the LPI, and the recovery rights. We don't have any other business as a bank dealing with the public administration. This is very important for us in the credit collection business. Credit collection that, as a performance, has been built on the history and on the experience of 40 years, of more than 200 employees that are active in this field, in our companies, and are allowing us to have a recovery performance that allow us to have a series of data about our credit collection that have, they give us the opportunity to use the accrual methodologies versus the cash methodologies.
As a last point, we have ample and stable funding, we have the technology, we have the culture and the people that is needed to operate in this business with a successful approach. All these elements, as I have mentioned, are very unique, and the traditional banks, the other specialty finance operator or new entrants, cannot match this advantage and this asset that we have in our company. Based on these three components of our business model, and in particular, the fact of operating in a large underpenetrated market, the fact of having a very unique business model, and the third component of having a competitive advantage that is not matchable by competitors, we are here viewing our future with a very optimistic view.
In this slide, we are projecting our expected trends in terms of the main KPI, in which that we use to look to our business. As I said earlier, in terms of volumes and in terms of average loans, we are expecting a trend in which we'll have a growth at a 10%+ growth rate going forward. In terms of growth yield on average loans, we are expecting an increase to a high single digit number, and in terms of revenues that at the end is the sum of the two, is the two earlier factor, we expect to have revenues that are 2.5 times the revenues that we have in 2022.
This value for us are values in terms of volumes that comes and are aligned with our long-term trajectory, also the trajectory that we have seen in the past, presented by Massimiliano. In terms of growth field, the growth of the growth field will be driven by the new interest rate environment, and mostly also by the unique business model that we have and we use, with the two sources of interest income that I explained earlier. On one side, the maturity commission, and on the other side, the LPI rights and the recovery rights that we charge to the debtors. I hope that you have now more clarity on our business line.
I hope that you share the positive or optimistic vision that we have for the future of our business line, and with this hope, I leave the stage to Enrico Tadiotto to present you the other two business of the bank. Thank you.
Thank you, Michele, and good morning, everyone. My name is Enrico Tadiotto, the Vice President of the Transaction Services Department, which manage the other two business of BFF, the payment business and the security service business. Starting with the payment business, we operate in a market, the Italian digital payment market, which has grown significantly over the last few years, especially post-COVID, and still has a high growth potential. If you consider that as you can see from slide 37, that we are still behind compared to other European countries, in term of digital payment penetration rates. On the other side, Italy can rely on a payment infrastructure that is already similar to the one of those countries, of those European countries, with a higher penetration of the digital payments.
The growth for this market is supported also by our National Recovery and Resilience Plan, which aims in general at the digitalization of our economy, which can have a direct or an indirect impact on the digital payments. Just to give you an example of some initiatives of this plan with a direct impact, we have the initiatives that allow everyone that has to make a payment to a public entity, to make such payment with a digital instrument. The other initiatives is the one that is making mandatory for all merchants in Italy, to accept a payment with a digital instrument, also for small amounts. We have a number of new regulations specific for this market. For example, the Instant Payment Regulation, that is making mandatory for all banks to provide instant payment services.
Today, probably most of the PSP, the payment service provider, are already able to receive an instant payment, but most of the small and medium Italian banks still do not offer to their clients the possibility to send an instant payment. We have the digital euro. I believe we are all familiar with this project, and there are still several topics that need to be clarified by the Central Bank. What we know is that it is inevitable, and probably will be launching for the assignment, and that the instrument will be distributed by the banks. This means that all the banks will have to make a significant investment in order to be able to manage such instrument.
That most probably the small and medium banker will prefer to use the services of an intermediary bank, like BFF, in order to share such investment and also to leverage on our economies of scale. Actually, we could play an important role for to guarantee the interoperability and reachability of this new instrument, which are both crucial for its success. We have the PSD revision. The review of such directive should generate more cost and more investment for the PSP, and this will favor the outsourcing by the PSP of non-competitive activities, which is actually what we offer. We have innovation. Innovation generally creates new players that can be served by BFF, and creates new type of digital payment instruments, and therefore, make it easier for an individual to access and to use a digital payment instrument.
A nd therefore favoring an increase of the number of digital payment transactions. It's a market with a high growth potential, also supported by the government, by the new regulations, and by the innovation. We play an important role in this market because we are a bank, the secondo livello, a second-level bank, which provides efficiency, simplification, and a level playing field for small players. In fact, a payment service provider that want to operate in this market can choose between two model, as you can see from slide 39. The direct model, which requires us to have direct relations with all other participants in the market. That means they have to manage many relations with other participants, with other players. They need to have access to all the payment systems, so all the EBA, TARGET2, and etc.
Obviously, this model requires higher cost, both fixed and running cost, more investment, and more complexity. On the other side, they can choose the intermediation model, which is what we offer. Based on this model, they need to open only one settlement account with us, and based on this account, they can settle all type of payments. They can offer to their client all type of payment instruments, digital, but also other type of instruments. Obviously, this model requires lower cost, lower investment, and generates less complexity, especially for the small players. With this role we play, we allow for more competition in these markets because the smaller PSP can focus choosing the intermediation model, can focus the investment on the payment instrument, which is the more competitive area of the payment value chain rather than on the payment process which is what we offer.
To manage the payment process, you need to follow the standard rule defined by the regulation. In this way, they can compete with the larger PSP that tend to choose the direct model. We have a strong competitive advantage in this market since we are the only intermediary bank that is not a competitor of other PSP in any segment. Obviously, our PSP doesn't want to share any information regarding their client, and especially regarding the payment flow of their clients with other PSP that are a competitor in this market. We have a competitive advantage also because we provide a full range of services that can be classified in three areas, as you can see on page 14. The first area is the intermediation settlement, which provides services that manage all type of digital payment instruments.
We serve all type of payment service providers, so banks, payment institution, and electronic money institution. This area has a high growth potential in line with the market trend that I explained before. The second area, check and receivable, is an area that manage the back office activities of payment instrument based on paper, like check and receivable. In this area we serve banks, but also directly public administration and other corporations. Obviously, this area has a negative trend because the market trend for this type of instrument is decreasing. Actually we believe we can partially offset this decreasing trend with new clients, given that our banks with a decreasing volume and therefore with a higher cost per transaction, we prefer to outsource such activity to an external provider, like BFF.
The third area provide payment service, all type of payment service directly to the final client. That can be a bank, a corporate, or public administration. We don't serve individuals. Even if we serve the final client, we are not perceived as a competitor by other payment service provider because our clients need a tailored solution that the other players struggle to offer. In terms of expected trends, we expect a modest growth, both in terms of number of transactions and revenues, given that the high growth in the digital payment instrument will be compensated partially by the decreasing trend of other instruments, as I explained before.
This is a business that generates also liquidity for the group, EUR 2.8 billion of liquidity that is expected to decrease slightly in the future since we are expecting less liquidity in the overall banking system. It's an important business for the group that operates in a very attractive sector, with a structural shift from the cash transaction to a digital transaction, and that is able to deliver steady growth and an important source of funding for the entire group to fund the business line of personal lending. Moving to the other business of the transaction services department, the security services business. Also, in this area, we operate in a market that has a positive trend, especially in the pension fund segment, as you can see on page 43.
If you remember, in the pension fund segment, we are the leading provider of depositary bank for closed pension funds, which represent more than 2/3 of the overall pension fund segment. It's also a market that is expanding in terms of potential clients, thanks to the recent change in regulation that is making mandatory also for Cassa di Previdenza, which is a kind of closed pension fund for the professional worker. It's making mandatory for them to appoint a depositary bank. They will need to issue the public tender to select the depositary bank in the next 6, 8 months. If you consider the selection process and the migration process, probably the services will start to be provided in one year and a half. It's a new market, worth about EUR 110 billion of assets.
Also, the alternative fund segment is very attractive. We don't see that represented here in the graph because there are no public data available for the overall segment. It's a very attractive in terms of size and liquidity, also because, compared to other segment where the number of clients tend to be stable or actually sometimes decreasing, in this segment, the number of clients tend to increase because there are new asset managers entering the market, especially because there are many new funds established, both by the current player and also by the new entrants. This is a market where a security service provider, in order to be competitive, in general, need to have scale. There are some European markets that are an exception to this rule. Italy is one of this market, also like Spain or Germany.
The reason is because in this market, there are many small and medium player on the client side that need a provider with a more flexible approach, a more customer-centric approach, and that need tailored solution. Local player like BFF, in those type of market, can have a competitive advantage. If you look Italy, there are some difference among the several segment, because if you take, for example, the mutual fund segment, is the most concentrated one with more than 80% of the asset concentrated within the top three-five player. Those asset manager are served by the larger security service provider, also because, they have a long term, longer term relations, originated by the acquisition that they made in the past, when the former controlling shareholder of the asset manager sold the depositary bank business.
We tend to concentrate on the smaller player, which represent a smaller portion of the segment. On the other side, in the other segments, pension funds, alternative funds, both on the banks and brokers segment, are more fragmented. As I said before, a local provider, like BFF, can have a competitive advantage. Also, if you consider that we provide the full range of core service to manage the core activities of our clients, and that we are able to serve all type of clients, except the foreign funds, where we are well positioned in the mass market that allowed us to continue to generate growth and liquidity for the group. In particular, we see many opportunities to delivery growth. Here on page 45, we list the main four drivers of our future growth.
The first one is in the alternative fund segment, where we see a lot of opportunity to increase our penetration among this player. We already have a full coverage of service, of core services for this type of player. We have also a wide range of value-added services. In the past, we have demonstrated to be very innovative because we are able to serve all type of funds, invest in all type of assets. We were able to acquire existing funds that migrated from other provider, security service provider. This is very unusual for this segment, as we know, because asset managers tend to avoid to migrate existing fund, consider also the short life cycle of the fund itself. The feedback that we see from our clients is that we provide a better quality services compared to others.
We have the new market, the Cassa di Previdenza, that I explained before. New market worth EUR 110 billion, is a market, the Cassa di Previdenza are a kind of closed pension fund for professional workers. If you remember, in the closed pension fund for employees, we are the leading provider with a market share above 35%. If you apply the same market share, that means we can generate more than EUR 35 billion of additional assets for BFF. We have also some Cassa that are already client of BFF for some value-added services that we developed in the past, specifically for this type of client, and also ahead of the changing regulation to position ourselves for this new opportunity.
We will leverage more on our role as the only Italian security service provider still operating Italian market. Also, to acquire new clients on the mutual fund segment. There are still some poor Italian operator using provider services from other foreign provider. We will continue to add additional value-added service to our current offering, also to serve new type of clients. Thanks to the positive trend of the market and this new opportunity, and this driver of growth that I just explained, we expect to a double-digit growth in term of assets under depository for the depositary bank services, and a low single-digit growth in term of asset under custody for the global custody. The combination of these two growth is a high single-digit growth in term of revenue.
Also this business generates significant funding for the group, EUR 3.2 billion, that we are expecting to double in the future, thanks to the high growth that we expect in the assets under depository. Also this business is very important for the group, with the high growth opportunities, delivering also a significant source of funding to fund, again, the funding and lending business. We presented the plan, page 47. We presented a plan with the growth opportunity across all business line. On this page, we tried also to list what could be the potential challenge of this plan, with some of these challenge will have also low probability. For example, on the payment business, we know that there is a consolidation of the Italian banking system that decrease the number of potential client.
There is the challenge of the decreasing volume for some type of instrument, which can be also positive, as I said before. There could be some new product or some new technology that could reduce the need of our intermediation services. On the security service side, there is the pressure on pricing generated by the larger provider. We know that we cannot at the moment cover the foreign funds established by the Italian asset manager, which makes difficult sometimes to acquire new clients and new asset manager that manage both Italian and foreign funds. On the Factoring & Lending side, also here, with some potential challenge with low probability. The plan in terms of volume and collection, the managing of the past due exposure that requires a lot of discipline.
T he uncertainty around the Late Payment Directive, and also challenge that we could face is that would be in the case if there is a dramatic shift in the macroeconomic environment that could result also in a DSO decrease. Thank you for your attention, also to the participants from remote. I will leave now the floor to Giorgio, our CFO, for the next session
Thank you, Michele. Thank you, Enrico and Max. Good morning to everybody. I'm Piergiorgio Bicci, I'm the CFO, and now I guide you through the balance sheet management, the operating cost, sustainability, and at the end, the financial target. About our balance sheet, we're going to maintain the balance stable in terms of dimension. This will be driven by the strong growth in the Factoring & Lending loans and receivables, but on the other side, progressive reduction of the hard-to-collect portfolio. On the liability side, we are going to increase our deposit, transactional deposits from the business of the depositary bank and the payments, and also the online deposit. This will be compensated by the reduction of the repos. Also, we are also a bond in order to cover the gap about MREL, and to increase our liquidity ratio.
Going deeply to the government bond portfolio, what will happen in the next year is the reduction of the fixed part of our bond portfolio. At the end of 2026, the floater portion of the bond portfolio will be the 8% of the total amount of the portfolio. This will give us a target of the 25% of bond portfolio compared to the total asset, with an increase in terms of interest income that will be triple compared to the interest income of 2022. For the funding, we have a trajectory in order to maintain our diversification. The main pillars are the deposits coming from our business in Transaction Services, that will reach a range between EUR 8 billion and EUR 9 billion.
Also, we're continuing to increase our online deposit, and we expect also to open in new geographies. On the other side, we are reducing our repos, and we are going to issue a bond in order to fulfill the MREL requirement, and this bond will be in a range between EUR 300 million and EUR 500 million. We're now at page 52, in terms of investment, we're going to continue our strong investment in order to increase our efficiency. We are working on new factoring system because we have to increase our volumes, increase our collection of operativity, and to extract the more value that we can do, also using the new technologies that are available. We are going to establish a branch in France in order to support the growth also in that in that market.
We are working also to renew our online deposit infrastructure, and we started the project in order to have an internal credit risk model that can be going forward some efficiency also on that side. This is something that we don't have forecasted in our financial target because it is a long process, and we started to work on it. In terms of asset quality, we are going to maintain our distinctive character because the 92% of our asset are towards the public administration. We know that this this is something particular because we have to classify as non-performing some the part of the of our asset, but we know that we don't have a real credit risk.
It it is utilize of our capital, but at the end, we know that we don't have losses as shown before by by that. Going to page 40, 54, we maintain our dividend policy. We change the threshold between switching from the total capital ratio to the CET1, in order to be aligned to other banks capital target. We are going to maintain the payment of the dividend twice a year. The first part after the first half results in August, and the second half after, at the end of the year. The starting capital position is very strong, so we know that we can fund our capital needs to the retained earnings .
We have the space, considering our CET1 target at 12%, to let our portfolio increase in terms of loans and we can solve any capital needs retaining also the earnings when we reach the level of the 12%. Now, for the sustainability, we have the three pillars. The first one is the environmental. We have a target to have direct carbon emission at zero at the end of 2026. This thanks to the fact that we will have the 8% of the population buildings that are LEED certified, and especially our new headquarter that we are building. This is a very good investment in order to have a good impact also on the carbon emission.
And to give also a sense of how for us it's important also what we do for the environment, what we do for our employee, and what we do for the community. We are going also to adopt also some important framework in terms of disclosure, considering the effort that we are putting on that on that side, and also to adopt some principles for good banking going forward. We want to achieve other ESG rating, maintaining our low risk low risk profile. In terms of social, we have two main pillars: the employees, so our population, our team, it's very important to push on the talent, on the diversification in terms of gender, also the nationality, because we are an international group.
We want also to give the responsibility in terms of management team, also to people that is not based in Italy, but across our countries, and also to reduce the gender pay gap. On the other side, we are very care also on the community. With the new shape of our foundation, we want to work for the community, for the sociality, in order to have three pillars. One is the health, the second is the social protection, and also the financial inclusion. For the G of ESG is governance. Our board published its own list, and they make an assessment in order to have all the competencies aligned also with our with our plan. This is a way in order to be fully aligned with the best corporate governance.
Saying that, we can pass to the financial target, we have page 50. A summary of the environment, about the interest rate, where we are here, GDP growth is expected to be around 2% for the next year in the countries where we are active. Also the inflation is around 2% on average in our countries. As we know, we are having a different environment in terms of rates. They are significantly higher than in the past, and this could grant, in terms of revenues coming from the deposits, an increase, compared to what we had in the past. Saying that, our financial targets are, as said before, for the cost income, we have a target to stay below the 40%.
We have a target of adjusted net profit in a range between EUR 255 million-EUR 265 million, with an earnings per share that will be in a range of EUR 1.27-EUR 1.23 per share. After all, we can pay over EUR 720 million in terms of dividend. That is around 40% of the current market cap, with a target of CET1 that is higher than 12%, and a return on tangible asset and tangible equity that is higher than 50%. Saying that, I leave the stage again to Max in order to close, to have the closing remark, to start the Q&A session. Thank you.
Thank you, Giorgio, and thank you, Michele and Enrico, for the presentation. We're truly a bank like no other, because we are actually 20 minutes ahead of schedule, which I think is a record in a capital market day. It's actually a pleasure to conclude with the presentation and summarize where we are, because it's actually an exciting time for us as a business. We're really looking for the future ahead, with as somebody said, with optimistic, but in a positive way, view. The reason is, the market opportunity ahead of us is very exciting. The context has changed, and we are uniquely positioned to capture what is the opportunity, because we've invested along the way in the last few years to be ready for this shift.
We have a strong operation, we have ample funding, we have strong track record of execution in very different times, and we've built a business which is long-term sustainable. Today, we're not only presenting business, we're presenting to you as shareholders, as potential shareholders, what is the opportunity ahead. The opportunity ahead is actually a strong growth in returns, both in terms of profit growth, with over 75% earnings growth projected to the next three years, and frankly, a lot of potential beyond that, and a 40% cash return, which means over 110% return, if we look ahead, which we think is an exceedingly attractive proposition. Particularly because we're actually not exposed to what other banks are exposed to. Our liabilities have already been repriced.
We are not exposed to the credit risk. A higher level of interest rate actually benefits us on the on the yield side. We are, we think, extremely well positioned to do well. We want to continue therefore to remain and be even more a bank like no other, either in specialty finance, with a unique value proposition in our reference market, remaining highly specialized and sustainable financially in the society where we operate. Operating, as we've done so far, with honesty and transparency, respecting and valuing our team, maintaining the leadership in innovation, customer service, and execution in our reference markets, and with a low-risk profile and high operational efficiency. Giorgio presented the target that we have given to 2026.
I think it's also important to think that our business as a long-term investment for the potential it has well beyond that. With that, we're ahead of schedule. I leave the floor to the question. We'll start first with the people we have here in London, and then with the people that are connected from afar. Thank you.
Hi, good morning, everyone. It's Antonio from Bank of America. Thanks for the presentation, and thanks for hearing and being able to hear us from the divisional head. It's very always useful. I've got a couple of questions, please. The first one, well, you're back to steady growth, with your decision to allocate more of your capital to fund growth in the business, you're basically securing your PNL for the next six years. You're one of the few, very few, to offer steady growth as well as a very generous dividend yield. Can you give us a bit more details in sort of the level of growth you're targeting? You talked about 10%, if I've done some of the math right, this is closer to 15% than 10.
How do you see the balance sheet evolve between here and 2026, and particularly your RWA density? because there's different moving parts. I'd like to hear a bit more about that. my second question is on the NII. Can you help us understand what are the key drivers of net interest income going forward, and particularly the evolution that you see for margins between now and 2026? Thank you.
Thank you, Antonio. Let me go through them. If you miss some of the questions, please repeat them. In terms of growth, we have a 10% plus growth in the Factoring & Lending business, that's what we have indicated. If you take the different components, we have nominal GDP growing at roughly 5%, then we have more penetration in the markets where we operate. Now, we live in an uncertain environment, so we're targeting a level which is similar to what we were targeting in a very different environment, which means probably we are skewed in terms of opportunity on the upside compared to the target. We can't control what our clients do, we're trying to be prudent in that respect.
In terms of balance sheet, if you look back to the structure of it, the message that Giorgio gave is that we don't plan to increase the overall size of the balance sheet. The reason is because there are RWA requirements and leverage requirement, actually, it's not that interesting for us to inflate the balance sheet necessarily. While our bond portfolio will amortize over time, we expect to grow our Factoring & Lending business assets, we'll have a re-composition of that. We have a re-composition of the liabilities, the repo becoming less important, partially also because frankly, the deposit spread becomes more interesting for us, even compared to normal repos. We will continue to have a pretty healthy liquidity.
What we are projecting is a world which is different than we've seen, the one we've seen, but with no shocks. Actually, shocks are usually good for us, because companies then tend to sell more receivable, our DSOs tend to grow, the balance sheet tend to expand. We always want to be in a position to take advantage of that. In terms of our RWA density, I think we are assuming a constant RWA density over the plan. Again, that's a combination of the improvement, I think, on the past view, capital absorption, and the development of our factoring lending business. In terms of a net interest income margin, you've heard from Giorgio some comments on the bond portfolio. You have the growth at the bottom of the interest income, which is 3 times what we have in 2022.
That needs to have the cost of the repos mostly taking into account. As you can see here, the fixed path of our bond portfolio will decrease significantly, and that's for amortization. What you also have, if you, if we expect interest rates to go down, then it means the negative carry on the fixed part of the portfolio will also go down. Whereas the spread on the floaters will remain the same. In terms of the other big component, net interest income, which is what Michele spoke about, Yeah, before, we are saying, I think 2.5 times the revenues from Factoring & Lending. Again, that's on the growth yield, we need to deduct the cost of funding, which is more linked to the level of the repo.
I think that's the way we've tried to give you an indication where we'll end up. Did I miss something? Okay, thank you.
Hello? Can you hear me?
Sure.
Okay, perfect. Thank you. Andrea Lisi from Equita. Two questions from my side on the Factoring & Lending. Three questions, actually, one on the capital. The first one is on the evolution of the volumes and the loan portfolio. In particular, you said that about 10% with 5%, it is quite inertial. My question is, how do you think you will be able to increase the penetration towards the public administration, not the National Healthcare System in Italy? Why so far the penetration was lower, and how do you think you can confess that you can arrive or closer to, close the gap towards the level you have towards the National Healthcare System, and the same for the penetration abroad in the other markets.
The other question is on the assumption you have in the plan in terms of LPI over recovery, because in the past it was higher, then it went down. Just to understand a bit, which are the assumption there, and also the assumption you have made in terms of DSOs with respect to what you are observing currently in the market. The last question is on capital. If you can provide, if you have an idea of how long will be the process for obtaining the internal models, and if you already have an idea of which could be the impact, the benefit you can have on capital from the internal model. Thank you.
Thank you, Andrea. On the IRB, we are not giving in the plan, we're not assuming in the plan any benefits, right? As I was saying, look, it's gonna be beyond the plan horizon, but we have the costs of actually implementing the IRB, which is not immaterial, as you know, as you know. That's in sense, we have we've built an option in there. We think there are two areas of benefit if it were to materialize. One is benefit on capital, but we are already at a low capital level model, so I know there is an output floor, so it's gonna be important but not dramatic.
Also it changes the way the past views are treated, because it has more granularity, and therefore, can have a good impact on the past view exposure, and also the kind of provision which is linked to past view exposure. Those are, I would say, the impacts. In terms of LPI over recovery, we need to also distinguish two things. One is the percentage of over recovery, and then the amount of over recovery. In terms of percentage of over recovery, it's been frankly, significantly higher than what we account for, and creeping up over time, and so, it's actually going the right direction. In terms of euro amount, in moments, we're seeing during COVID, where public administration tended to push for paying quite fast for the new invoices, they actually left behind the old ones.
The amount, the volumes of collections were smaller. We expect that to continue in the plan with taking a very prudent approach on over recoveries in general, because, again, that's a lever we don't control fully. In terms of the loan portfolio, then I leave to Michele to comment, we also country by country. Let me put it this way, we have grown a 15% plus since 2014, when we had split payment, a reduction in DSOs, a lot of liquidity, no worry on public administration paying, okay. We are saying, the world has changed, and we're growing at 10%. I think in terms of s orry, I forgot something, which is actually nominal GDP growth was closer to 3%, not 5%, 6%, as we have now.
Overall, the micro trend is very positive, very supportive, and we don't have as many headwinds. We have a lot of tailwinds. We have strengthened the team over the last few years. Michele has taken the leadership in the combined Italian international business. We have a new commercial director in Italy, a new commercial director in Spain. We're investing in the presence in other markets, and so we are quite positive on the opportunity ahead. As you know, the growth comes from the decision of customers of dealing differently, the higher penetration, dealing differently with their own customers. What we offer is not only financial product, but it's also collection service, and it's a way to separate the sale of the goods from the collection.
Now, it means also the customers need to be happy that the way we are gonna collect will not damage the customer relationship, which creates, on a positive side, a lot of lock-in. We never lose customers, but it takes a long time to actually convert them. I think now, given the shift in the interest rate environment, in the liquidity, it's a good moment to push for incremental growth, but we can control that only up to a certain extent. I leave to Michele to complete the answer.
Massimiliano, you mentioned several factors that are actually the factor that can support us in the increase on the penetration. Let's say on the Italian side, clearly, what we notice is a renovated appetite for our products, thanks to the new liquidity environment and to the new interest rate environment, that's for sure. The area of the public administration is the area in which we have grown significantly also in the last year, is an area in which we see the potential of growth.
The usage of the EUR 40 Recovery Cost Rights is something that in the rest of the public administration, not NHS, it's more relevant in terms of, because they have usually a more fragmented portfolio, so more invoices there, and support also our value proposition, because we are the only one that value this part of in our value proposition, and this could be all levers there to support the growth on the public administration side in Italy. T he other countries, what we do see is that, as you know, are countries where we have been starting our operation more recently, like, for instance, Greece, Portugal, or even France.
There is an initial growth, is a growth that, is driven by the team, but, is a growth that can be there, and the market is pretty virgin and can be penetrated much, much better than the Italian market with a very high potential. Part of this growth, as I mentioned, will be related also to the French business, where we plan to open operating a banking branch locally in France at mid of next year. This is also a shift, because till now we were operating from Italy. You can imagine the difficulties on operating in a market, not having a local presence. When we will have local presence, we think that we can have a lot of satisfaction from from that decision. Thank you.
Good morning. It's Giovanni Razzoli from Deutsche Bank. I've a set of three questions, one on the Factoring, one on the payments, and one on the group targets. On the Factoring, it's a quite comprehensive question, so can you please elaborate feedback on the repricing process of the maturity fee that you have launched last year, and what's the feedback of the clients? What you expect the contribution from this on the plan? Regarding the grow- of the volumes, you mentioned that the operating leverage, that is clear in your business. Can you provide us with an example or elaborate a bit more on this point, which is crucial for your operating profit grow going forward?
Related to this, during the presentation, you mentioned that you plan to grow and to expand also new sectors with the more, you know, granular tickets, so for the benefits of the Recovery Cost Rights, if you can elaborate a bit more on this? The very last question on the Factoring. I was wondering in what scenario you see a risk of a significant decrease in the DSO from here, that's for the Factoring. For the Payment, it's more straightforward, you've provided a very, you know, clear example of how we expect the market to grow in the next couple of years, there are secular trends, regulatory changes, product offerings, which are expanding.
Despite this, you seem to have incorporated a rather prudent assumption in terms of growth of the revenue, low single digit in a market that is growing, high double digit or high single digit. What are the elements which explain the difference, you see a price inflation, more competition or what? Another area is referring to the group targets. I was wondering whether you can give us an indication of what are the potential adjustments to the net income in 2026, because you mentioned that you will stick to 100% payout policy on the adjusted earnings. I see that there are impacts of the stock options, if you can clarify this?
The very last one on the, you have a significant, you know, hidden value from the LPI and Recovery Rights, but not recognized in the P&L. I was wondering whether is there a way to, you know, crystallize this upfront with some kind of financial engineering transaction, so to get this upfront rather than over time? Thank you.
Thank you, Giovanni. Look, the easiest way to recognize it upfront is simply to recognize it upfront. No, as we have the right to, well, you're right. We have under IFRS to provide evaluation of the recovery rate based on our expected recovery rate. If there is anything, actually, we have discussions with the auditors, is that because we are having higher collection, no, how far we are from between 50% and the actual collection. Also there is upside there, but we're quite prudent in general, because we don't also want to inflate our P&L and also constrain our negotiation with the public administration. Set of financial engineering would be simply decision by the board to recognize more, and that's clearly a potential.
In terms of our 2026 targets, we indicate we're gonna pay out 40% of market caps, EUR 920 million to 2026, which is exactly the same mechanism we've always had. We pay out the excess capital that is not needed for our growth, there's no need to keep the 12% correctly Tier 1. I think it's worth highlighting three factors which are potentially not that clear to the market of why we don't have what appear to be 100% payout ratio compared to the earnings we generate. First of all, we are growing a little bit. We have excess capital, as George explained, that support the growth. At a certain point when the growth will leak into the capital level, then we need to retain earnings to fund, to fund the capital portion of that growth.
Importantly, there are three things which are worth mentioning. First of all, the AT1 coupon comes out of the equity, from an accounting perspective. So, that's around EUR 25 million over the plan timeline, which is, if you want dividend, it goes to the AT1 holders. We have a very prudent approach on current provision. We have given targets, which is another EUR 30 million plus over the plan horizon. Importantly, we mentioned how important it is, our equity incentives to the team, until we have stock options there, part of which are actually paid with the buyback of the stock, synthetically. That accounts for another EUR 60 million of capital, which will get absorbed, which translates in dilution to the shareholder. You see the dilution in terms of earnings per share is roughly 2.8%.
The stock option plans are a larger amount in terms of overall dilution. Part of the dilution is covered by consumption of capital that you see on the balance sheet mostly. Those are the indications. In terms of payment, I will leave it to Enrico to comment, but in general, rather than moving fast, there are some payment instruments which are long-term decline, checks and receivables. There are shifts in usage of instruments. The new payment instruments are coming through, instant payments. We've always said, look, actually it's a dynamic world, where because we're exposed to the overall environment, and there's also some fee pressure in terms of particularly new, the new instrument of payment. Now the overall growth is gonna be more in the single digits.
But it remains a very important, very important business for us, which generates liquidity, and also it has, goes beyond the plan horizon, the opportunity to improve the profitability. We need to negotiate the contract with Nexi in 2026, which is not included, and so we see quite a lot of opportunity to continue to do well. Enrico?
Yes, sir. The reason, the main reason is the one that Massimiliano just explained. The high growth potential of the digital payment is compensated by the decreasing trend in trade receivable. Also, because now the trade receivable has a significantly decreasing trend, more than 15, probably around 20%, but at some point will be stabilized. It's not a payment tool that will disappear from the market. This impact will be still meaningful in our plan until 2026. Probably if you go beyond that date, the impact will reduce or our growth will be higher compared to the modest growth that we see in the next three years.
Also because the other area of growth for this market are the new, the new player in the market, so the new payment institution, the electronic payment institution, that now they are just they just started the business and the volume of this player are relatively small compared to the volume of banks, which are our historical client for this business. If you go beyond our plan horizon, probably we would see higher growth compared to the modest one that we indicated for the next three years.
In terms of the many questions, the Factoring & Lending business, repricing process is underway. If you're not done entirely this year, our contracts also expire next year, that will come through going forward. Going back to what Michele said, the fact that we have the ability to collect late payment interest and also for EUR, this is actually flexibility on how we structure the pricing for customers that other players don't have. That's actually quite a competitive advantage, as Michele pointed out in his part of the presentation. It's actually very difficult for other people to replicate what we have, also because we don't have the track record to collect those accessory, ancillary revenues.
In terms of the decrease in DSO, we put it there as a risk. We are always a bit paranoid as a management team to always thinking what can change compared to the environment. I think that's the right mindset. That could happen, I would think, only if we enter into an environment of sharply decreasing interest rate, and again, a huge injection from the public sector. You know, we go through another financial crisis, and suddenly, there's a lot of European solidarity, there's no pressure on the Italian sovereign, on the peripheral sovereign, but there's an injection of cash into the system. How that is likely to happen, probably very unlikely, but we keep that always in mind.
The way we always think about the business is that we need to grow our customer base, and then if you grow our customer base, then that takes care of a lot of other risks that we can't necessarily control. If you look at the distribution of probabilities, there's probably more distribution on the upside of DSOs in terms of longer DSOs than in the other. Let's also bear in mind, and that's something which sometimes we, ourselves, tend to forget, when you buy 2% of a 1 trillion market, actually the average matters only to a point, no. What matters is the distribution, how many bad payers there are in the market. Michele mentioned France. France has a quarter of a trillion EUR of receivables. It's EUR 120 billion of receivables generated from goods and services.
Only 20% are paid late, well, only 20% of EUR 120 billion is EUR 25 billion. Okay? Compared to us buying EUR 7 billion overall in Europe, it's a gigantic market. What matters at the end of the day is the distribution, not only the average. In terms of the operating leverage, look, we have put through the plan quite a bit of investment still, the new factoring system that we launched, the RB for the group as a whole, which impacts factoring substantially, the new branch in France. We have a business, inherently, the more it grows, the more it becomes efficient. We have the same number of collectors in Italian healthcare that we had eight years ago. Why? Because frankly, there are only that number of hospitals in a country.
Once we enter a country, we need to have a fixed cost infrastructure, which tend to grow much slower than the growth of our customers or the growth of our debtors. If I buy today, going to the example you're asking, a portfolio of healthcare receivable in Spain or in Italy, the margin cost to serve is zero. Why? Because I already have the collectors who call up the healthcare authorities in Italy or the 16 communities in Spain, and making a call for collecting EUR 1 million or collecting EUR 2 million or collecting EUR 5 million, doesn't take materially longer. Yes, the margin clearly there are more invoices that have been saved.
We're talking the margin, therefore, the more we grow, the more we become efficient, which is actually quite important in terms of competitive position, because our scale is much bigger than any other player in the market. If anything will become bigger, then actually it's possible for a new entrant to actually get that scale quickly. In a fixed cost base, we always have competitive advantage in pricing, that's why we generate substantial higher return on capital. In terms of the volumes and the dynamics, Michele mentioned it before, but let me need to comment further. We are seeing more customers being interested in the product. We've seen the shift in the last few months from us knocking at the door to actually people knocking at our door, which makes actually sales a bit easier, overall.
We are quite positive in the outlook, particularly if the environment remains the same. I would say, if interest rates were actually to remain higher for longer, that would become even more attractive. Michele, if you want to comment?
Yes, just to comment. On our product, clearly, the main advantage of our products are mainly the fact that the customer can recognize and do the recognition of the, in their balance sheet, of the products, of the receivable they sell us. That, with our products, we take, they can also avoid multinational companies, they can also avoid to have country risk. That is something that is back in the agenda of the multinational companies, because all of the tension that we are living in Europe and also outside Europe. Clearly there is the cash component of the liquidity that clearly has increased the interest of the customer on our products. More than that, there is also the service.
The service, meaning the operational service that we provide to customer, because many customer need to enter in a revolving contract with us. That's meaning that essentially they are externalizing their recovery collection versus the public administration, no? All these elements that we had also in the past, in our value proposition, now, for several reasons, with the change of the economic and macroeconomic environment, have an increased appetite for our customer, no? Because as I said, the recognition is important when there is a recession that is upcoming. Liquidity is important when, because we have less liquidity in the market, the counter risk is back in the agenda of multinational companies, and the fact of optimizing the cost base is part of the decision to sterilize the service of the credit collection.
For all these reasons, we see a renewed appetite for our products. Thank you.
Hello, can you hear me?
Yep.
On the NextGenerationEU funds coming through, what's the timeline on the benefit there and the potential point of? Is that included in your guidance already?
There are two things there. One is clearly the more public sector investment, more invoices being created, more opportunity. We are including that in the overall sum of money available, and overall amount of invoices, which is the addressable market. We're still doing a bottom-up evaluation of that. The timing is in, most in the next three years, there's been delays in disbursement in Italy. Frankly, to signal also the ability of public administration to really manage their operations. There's also an effect on payments in terms of the reforms that generation EU funds are driving in Italy. That's more short term, but what's for us, it's important will be shift on the payment side, on customers' willingness to use the electronic invoicing in the system, which is driven again, by low penetration of the product.
Second question, when is the decision on the new LPI directive due?
We expect, we are monitoring the situation very closely through directly and also through our participation in the various factor associations across Europe. We participated in, and Alessio recently participated in a workshop in Brussels, around that. The expectation is that there will be probably a proposal in September. The direction of travel is actually quite transparent in the sense, if you look at the submission, there has been an open inquiry. There's a submission by various parties. The parliament has issued paper three years ago. We expect, therefore, no real changes in payment times and interest rate or on the recovery cost collection. We've asked actually to have it adjusted for inflation at least. We'll see if that happens, I think it would be pretty positive.
I think there would be probably maybe some push to have an easier enforcement. of the collection of LPIs and for the euros, overall, we see that the discussion being more in the business-to-business relationships. The debate in Europe at the moment is, how can, small companies be protected versus large companies, more than in the B2G transactions. We assume a stable or favorable environment on the directives, no negative change, to be honest.
Good morning to everybody. It's Michele Baldelli from BNP Paribas. I have some questions on the development of your funding strategy to EUR 3 billion of deposits that should come from Transaction Services. I was wondering what is of the EUR 110 billion of this segment that is already using depository services? Do you have an idea, or is completely, let's say, not using these kind of services? Are these subjects anyhow already kind of your clients in other segments, or part of other groups where you have already certain market share or not? The other point that I just wanted to have a confirmation of a thought that I had.
When you spoke about over collection and the percentage that went up compared to the 50%, is it anyhow driven by the fact that Spain, in the last few years, has grown, and therefore, let's say the percentage probably has gone up for this reason, and in the future, given that Spain, the last couple of years was a bit weak on the loan book, could drive back that kind of percentage to the normal level? Just to hear your thoughts about this. Thirdly, on the growth that you project on loan book volumes, how much can we say is driven by increasing share of wallets of your already client? How much is in client? On these, I would specify, if possible, so how much is driven by funds? Thank you.
Coming from a French bank, we can answer, not that much.
The French wife.
No, in terms of loan growth, it is than bottom up. To give you in general, we have still. While in healthcare, we tend to buy the entire portfolios, in other segments, of our customer base, we are not buying the entire portfolio. There is growth opportunity in that. Something which is, we don't stress enough, is the opportunity to service our customers across different geographies. If we take our top 10 customers, and if we were to serve them across all our geographies, we'll grow more than we indicate in the plan, okay. Simply because actually we are serving customers, rarely across multiple geographies. Why? Because it actually takes a bit of time for people to be convinced to sell the receivable on a revolving basis.
That's the first point of call, selling the service across more geographies for our existing customers, new customers, and then the positive impact of France with the establishment of branch is not really matched in the plan. We think there's a big potential, but we want first to be there and see, and then establish targets. In terms of your collection, in reality, no, we've had, we have a stable collection in Spain of 100% over the years. The other markets has been going up, there's no mixed effect to speak of in that, in that respect. We have seen the same trend. In general, actually, we've been able to collect better in terms of recovery in the rest of the public administration compared to healthcare, simply because in healthcare there were habits of how much we w
ould discount. It was more difficult to negotiate different levels with the healthcare entities. If you have a new counterparty, you start afresh. You can set the expected recovery rate in negotiations different level. In terms of funding, I will leave to Enrico to comment on specifically on that. Let's go back to the mix first of all. It's important to flag that the retail deposits for us are relatively small in the context of the overall balance sheet, and for us, are really a buffer of liquidity we can manage depending on the different funding conditions. For instance, at the moment, we have, I think, out of memory, EUR 150 million in retail deposits in Italy. It's a market we don't really cover.
Why? Because it's cheaper to collect in Spain, for instance, or the swap rate also in Poland. We can actually play around that. We see a big opportunity to grow in Transaction Services, which is driven, yes, by the Casse, and Enrico will talk about the penetration of the depositary bank services there. Also in pension funds, where we are the leader in Italy, and where there are actually a number of tenders that are coming up for customers which are not ours. So by definition, if they're not ours, we don't run the risk of losing them, and we should gain them, you know, some of them.
It's not only the EUR 110 billion-EUR 120 billion of Casse, which if you do the math, if we were to get the same market share we have in pension funds, that would mean roughly EUR 40 billion, 5% is EUR 1 billion of liquidity just there, but it's also the rest of the market. Also, let's not forget in pension funds particularly, we are still in the accumulation phase in Italy, for the pension funds, less in the Casse. There is also a compounding effect of that over the next few years.
Yes, if I may add, also the inaudible fund segment, we provide significant funding. There are three categories: Casse, also in order of priority, Casse, the other pension funds, and also the inaudible fund segment will generate liquidity for the group. Regarding your question on the depositary bank service for the Casse, as you know, the depositary bank services are regulated services. The regulation specify which type of activity you have to perform. At the moment, as I said before, this service is not mandatory for them. I thought they are a fund, so they have to deposit the asset somewhere. They use it, but they tend to use more than one provider, global, more than one custodian.
Sometime, only few of them, they ask some of these custodians to perform some control, which are kind of activity quite similar to what the custody bank services, but there are only few of them. In general, no. The answer is no, they don't have at the moment a provider that provides the depositary bank services, but they have more. They use more than one custodian for the assets. The second part of the question, if I understood correctly, you are wondering if some of them are already clients of the asset?
Yes, some of them are already client of the asset, because in the past, we developed some value-added services specifically for this type of client, because we wanted positioning to position ourself ahead of the change in regulation in order to have some relation with this type of client.
If I may just follow up. If I have to look to the spread of funding costs between the Transaction Services and the online deposits, what could be the difference of funding costs between the two? 50 basis points, 100 basis points? What could be in 2026 in your model?
Well, we're being prudently assuming that the retail funding cost is more expensive than the security services cost. Overall, the funding cost will be more expensive than today in terms of spread.
Okay, thank you.
Just maybe to clarify also on the previous question on Casse. Since there is this change in regulation, it's mandatory for them to public a tender offer to select the depositary bank. Even if they use a custodian that is making some control of the asset, with this change in regulation, they have to publish a tender offer, public tender offer, to go through a process for the selection of the depositary bank. All of them, they have to do that. If there's no more questions on the floor, we have some questions from people who are connected virtually.
The next question from the conference call is from Simonetta Chiriotti with Mediobanca. Please go ahead.
Hello, good morning. I have three questions. The first is on the evolution of earnings. You have given a target for 2026. We have a target for 2023, which implies a higher growth in 2023 with respect to the average growth projected in the plan. How do you see the evolution of earnings, roughly speaking, in 2024, 2025? How will we approach the target in 2026 with the steady growth? Is there anything to comment on this? The second question is on dividend. In the press release, you said that there is the possibility of expanding RWA by EUR 1.1 billion, maintaining the 100% payout. Should we expect this to happen relatively soon, or should we expect this to wait into 2024?
You commented before that you don't see higher RWA density. My question is: Don't you see higher RWA density, not even for the mix? There are some assets that are more capital than others. Finally, I'm referring to the slide 26, where you give an idea of the potential market. In the potential market, there are also social transfer in kind and public investments, so CapEx. You are not in that segment. Are you targeting that segment? How would this be different with respect to your current business? Thank you.
All right. On earnings, well, we've given 2026 targets. We are not giving intermediate targets. We have a big step up in earnings this year. We are investing the business, and the trajectory will be distributed, but not evenly across the three years. In terms of dividend, let me flag one thing. We absorb capital for operating risk, because we are highly profitable, the fact that we're saying that the average RWA density remains flat, actually couldn't, because the RWA density actually of our lending business, at the margin is more around 20%. That's clearly something which assumes a constant RWA density, the same level of past due over the total portfolio, and also more absorption on the operating risk.
Overall, no, there is some buffer there. I think the having higher RWA density will mean having significantly higher past dues, because inherently the public sector receivables have a lower RWA RWA density than our, than our average. In terms of segment, let me start with a joke. Frankly, we do EUR 7 billion purchases, even if it's on half a trillion EUR, there's still plenty of room to grow even in there. Your question is actually a good one, because the other two categories have a different credit risk profile, and we've done historically fairly little there, because we are quite prudent, and we continue to be quite prudent, which doesn't mean that we can do, we can't do anything there.
The transfer in kinds are mostly on the healthcare side, services are provided by private hospital to the public sector, which has a different risk profile if you buy within budget, outside budget, in a contract, outside the contract. We have the tools to do to work there, but we are doing at the moment fairly little. The other category is on CapEx, where again, there is more risk on the existence of the receivable. Again, in certain countries, there's more risk on there are different legal procedure to go about it. Again, we see an opportunity there, particularly because we're seeing also more demand from customers in both sides.
Overall, EUR 1 trillion market, half a trillion EUR covered, by goods and services, the rest by those two niche markets where we've been less present, and it provides for the opportunity. Any other question online?
The next question is from Jack White with Anker Capital. Please go ahead.
Hi, good morning. I've got two questions. I was wondering if you could firstly give some color on the cost of Casa BFF and the renovation of BFF's real estate. With that, how do you think about the strategic purpose of the subsidiary, BFF Immobiliare? My second question is regarding the payment segment. Can you talk about the importance of the Nexi partnership, and how much of the business is driven through the Nexi partnership? Thanks.
I'll ask you, if you don't mind, then, to repeat your first question, it was difficult to hear. On the relationship with Nexi. Nexi is our distributor in Italy, where the contract goes to 2026. He's also our IT service provider, with the contract it also goes to 2026, although we have some options to extend part of the contract already to 2029. It's an important partner, it's an important client as well, because it's one of our major clients in the payment business. We have an intertwined relationship. We offer to them services, as Enrico pointed out, that they would like to buy otherwise from another bank, and being them servicing various banks and as not being competition with other banks, we are a immediate provider.
We are intertwined to their IT system, and they provide most of it, and so it's easier for them to use us. In terms of the IT platform, clearly they are the largest IT payment provider in Italy. They're going through an upgrade of their IT platform, so for us, we can piggyback on their on their investment. Because we've been partners in company until four years ago, there are actually a lot of personal relationship, which makes the things easier. We have a good working relationship with Nexi, and we'll discuss the extension of the contracts in due course. It's an important partner and supplier for us. Want to add something, Enrico, on the topic?
My first question was regarding the cost of Casa BFF and the renovation of BFF's real estate, and then about the strategic purpose of the subsidiary, BFF Immobiliare.
Immobiliare. Okay, sorry. On the real estate, and I always joke, there are two signs when the CEO goes crazy. One is when he gets a private plane, and second, a new headquarters. Clearly to reassure, we don't have a private plane but we have a new headquarters building, so I want to reassure on that. It's actually, we think it's actually a pretty attractive proposition. Why it's a pretty attractive proposition? First of all, we bought the land at a pretty good time, at the beginning of 2022. It's in an area which is being redeveloped around us, which frankly will be another time.
Because from an accounting perspective, if you lease a building, you have actually to incorporate in our RWA the full payment of the leases until the expiration of the lease. Actually, usually have a six plus six year lease, actually, having a building in your balance sheet doesn't absorb much more capital. We can fund a building, not at the cost, the cost of funding of a real estate developer, but with the cost of funding of a bank. We will sell our existing headquarter, which should give us a release of capital as well. All in all, we think at a normal cap rate, that once we've concluded the construction of the building, we will actually generate capital in terms of the value we have on that building compared to the cost of building it.
The strategy will be to maintain it in our, in our balance sheet.
Okay, thank you.
We don't have any more questions from the virtual audience. I don't know if there are any questions from the audience here? Otherwise, thank you for, all of you for attending today. We are sharply on time. Thank you again. Since you have endured, I think there is coffee outside, and also restaurants available probably.