Good afternoon, and welcome to BFF Banking Group Full- Year 2025 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be the opportunity to ask questions. To ask a question, you may press Star, then one on a touchtone phone. To withdraw your question, please press Star, then two. Please note, this event is being recorded. I would like to turn the conference over to Caterina Della Mora, Investor Relations, and Giuseppe Sica, General Manager. Please go ahead.
Good afternoon, everyone, and thank you for joining our earnings call for BFF Full- Year 2025 financial results. We will start with a presentation led by our General Manager, Giuseppe Sica, followed by the Q&A. Let me hand over now to Giuseppe Sica.
Thank you, Caterina, and thank you to our participants for joining this call. Let me start on slide three. Our financial results for 2025 are solid. Our adjusted net profit is up 6% year-over-year. This is underpinned by strong balance sheets, a more conservative approach, and continued growth across our diversified businesses. We also demonstrated our ability to generate capital. As we announced a week ago, we have taken decisive actions to de-risk the business that will support future growth, and we will present medium targets with our new strategic plan in the second half of the year. Moving now to the key financial metrics on slide four. Let's look at the wider context. We are a bank with a solid level of profitability, with adjusted ROE at around 23%.
Even on an unadjusted basis, ROE still reached 11%, despite the impact of the de-risking actions. I already mentioned adjusted net profits being up 6%, and our deposits in Transaction Services have grown 15% year-on-year. Our loan-to-deposit ratio is at 75%. We generated over 300 basis points of capital in the year. This allowed us to de-risk the balance sheet while maintaining profitability. And finally, our Common Equity Tier 1 reached 14.1%, well above our 13% internal target and above the targets we communicated one week ago. Let me touch here briefly on the dividend. Our dividend policy remains unchanged and targets a semiannual distribution of the adjusted net income generated in the period and in excess of 13%.
Today, the board of directors has made the decision not to propose a 2025 dividend to the AGM, and this is in order to solidify our de-risking actions. Let me go back to business and P&L on slide five. As I've already mentioned, adjusted net income was up year-on-year, thanks to both Factoring and Lending and the Transaction Services business, which both contribute positively to growth. Net revenues were up 1%. On the cost side, OpEx was up 2%, and we continue to invest in key areas to support long-term growth and value creation. Profit before tax for Factoring and Lending was up 1%, despite what we've discussed in other calls, the impact of re schedulings. In our Transaction Service business, PBT has grown to around EUR 50 million.
I will provide more granular detail later on, but let me highlight profitability of these divisions would be significantly higher if they just invested their liquidity in BTPs. Let's look at the Factoring and Lending results on slide six. Net revenues are up slightly, and they are supported by improved gross yield spread versus ECB MRO rates, which drives our funding costs. And this is despite the impact of re scheduling, which we announced last week. Let me remind you that thanks to the increase of the LPI collection days announced last week, re schedulings are also expected to go down going forward. Finally, off-balance sheet funds remain an important source of value creation in the medium term, especially as we accelerate and will accelerate collections. Let me give you now some KPIs on our Factoring and Lending business on slide seven.
Volumes in Factoring and Lending are up year-on-year. Loan book was almost flat. This is thanks to collections. We have a geographically diversified business and strong, so strong growth in several markets. In Italy, our volumes increased 5%, while the loan book saw an improvement in collections at year-end. France, so the loan book grew at 135%, while volumes increased by 155%, thus already surpassing Greece and demonstrating the significant growth potential of this strategically important market. We estimate that the addressable market in France is double the size of Italy, meaning there is a lot of untapped growth for us to go after. Moving to slide eight on payments. Deposits showed a good performance and are up 4% year-on-year.
To provide some additional context, let me remind you that deposits from Payments are remunerated at Euribor or below. If the Payments division invested in variable Italian government bonds, PBT would have been around EUR 70 million. 80% higher than what we reported of EUR 40 million. Moving to Securities Services. This recorded a very strong growth in liquidity, thanks to an increase in Depositary Bank Assets and Global Custody Assets. With a strong start of the year in 2026, where we added two significant and large clients for us. Similar to what I mentioned on the previous slides, deposits from Securities Services are remunerated at our internal transfer price of Euribor. If the division invested in variable government bonds, Italian government bonds, PBT would have been nearly four times larger than reported at around EUR 50 million.
BFF, on the next slide, continues to invest in initiatives to support long-term value creation across our whole business. This resulted in a 2% year-on-year increase in costs. The additional investment was focused on improving collections and improving digital technology for Digital Euro in the Transaction S ervice business units. Costs are also partly up due to inflation in Poland. We still maintained our cost-income ratio at 48%. Let's look at our balance sheet on slide 12. Loans were flat year-on-year due to improved collections. We achieved strong growth in Transaction Services deposits, up 15% versus 2024, and this allowed us to reduce significantly online deposits while maintaining healthy loan-to-deposit ratio of 75%. Please note also that in other assets, we have around EUR 600 million of reverse repos, so the net balance of repos is much lower than shown on the slide.
As a final point, let me highlight that equity increased by more than EUR 150 million since 2023, re classification, to more than EUR 100 million, and this includes the negative effect of the de-risking. The next slide, this is a new slide. Just two points for you. We have around EUR 100 million of unrealized gain on the variable bond portfolio. As we have done in the last five years, we can manage this gain over time, and this EUR 100 million is much higher than it was in the past. Number two, we have around EUR 1 billion in fixed bonds, yielding around 0.6% and expiring largely by 2027. This will provide a clear tailwind in the years to come. Turning to slide 13. BFF is fully focused on maintaining a low risk profile.
Total NPLs, which mainly relate to conservatorships, are stable or decreasing at around EUR 100 million, and are largely under European Court of Human Rights, confirming the liability of the Italian state. UTPs are down, thanks to our collections and agreements in Poland. Total impaired loans would be down by more than EUR 300 million year-on-year, if included, the effect of the cure period of close to EUR 200 million, largely driven by actions which we undertook in the fourth quarter. I would also remind again, that our NPL exposure is almost entirely towards public administration. You are familiar with the de-risking actions we took one week ago, but let me provide some additional color on the next slides. We analyzed the perimeter of Italian negative court rulings.
This is equal to around 5% of the group loan book, and 98% of these are under appeal. As you know, we also have the right to return invoices to clients. The rulings mostly relate to legal claims, which have followed the ordinary legal action procedure. We have already returned, as you know, to the use of injunctions, which we expect to speed up resolution times. It is important to note that these provisions are a reflection of a possible lower profitability on this portfolio, not to credit risk. Possible lower profitability, mainly due to two factors. One, the differential between LPI rate and the rate of, the cession rate to clients, and two, the longer average length for completion of claims following Italian ordinary legal actions, compared to injunctions, which we started again in 2024.
The approach to provision is based on a ruling by ruling analysis and does not take into account out of court transactions or positive rulings. We expect that the court rulings on ordinary legal actions will come to a conclusion in 2026 and partly 2027, which is reflected also in our projections for 2026. Finally, as I mentioned last week, BFF has EUR 53 million in off-balance sheet revenues related to final positive court rulings, which continue to generate LPI, 40 euro and anatocism, and we have a lot of sentences in positive ruling, not yet final. Moving to our past due exposure on slide 15. Past due would have more than out since December 2024, excluding the next new volumes and the new debtors in past due. Going forward, past due reduction will be supported by two periods: the potential securitization and the de-risking actions.
In particular, let me remind you, the potential securitization, as I said on last week call, is not included in our estimates. Moving to capital ratios on slide 16. On an organic basis, BFF generated more than 300 basis points of capital year-on-year before the one-offs. Even after taking into account the one-offs, our capital position remains strong at 14.1%, above our internal target of 13% and well, well above the threshold. We've also continued to reduce, as we said, RWAs and RWA density, and we have more opportunities to do so in the future. Let me give you just one example. Our EUR 180 million in cure period will also result in a reduction of more than EUR 200 million in risk-weighted assets, probably closer to EUR 250 million.
Now, a quick summary on the next slide of this set of results before we move to Q&A. In 2025, BFF achieved solid level of profitability with an adjusted ROE of around 23%, and we demonstrated our ability to generate capital while taking significant actions to support future, for the next few years, growth. Thank you for your attention. I will now open to Q&A.
Thank you. We will now begin the question- and- answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. The first question comes from Tommaso Nieddu, from Kepler Cheuvreux. Please go ahead.
Hello, good evening. Thank you a lot for taking my question. The first one is on the provisions, so that would be very helpful to have a bit more color on your provisions in the current assumptions for 2026. So to help us to understand how the new policy in the provisioning translates into the numbers. The second one is on the dividends for 2025. At the end, the CET1 ratio was at 14.1%, so above the range you gave just one week ago. So if you can help us understand why zero dividend for 2025 is the optimal choice. And the third one, a very quick one.
I'm just trying to understand if the longer collection assumption for the late payment interest should mechanically depress earnings from 2026 onwards. Thank you.
Thank you, Tommaso. I will try to answer your questions to the best of what I can say. So provisions, the EUR 72 million was a one-off and was the result of several years of ordinary legal actions. You know, that they started in 2020, 2021, 2022, 2023, so it was several years.... So, you know, the number for 2026 will be a fraction of that. We don't give numbers, but, you can build a reasonable estimate based on what I said. And this estimate, is already included in EUR 160 million that we gave for 2026. As I said, for me, what is more important is that these ordinary legal actions will die off after 2027, based on the timing of Italian court rulings.
Okay, so you still have some headwinds in 2026, not much on 2027, and then we should be in a more normalized and positive environment. On the dividend, as I said, dividend policy remains unchanged. We have announced certain actions. We have announced that there are potential other options, and I, as the new general manager, want to solidify these actions. I remain committed, and that's why I said it in introduction to the dividend policy of the bank. Would, would this the best decision from the board? The market will judge. I look at the market in the long term. I don't look at the market, tomorrow, so that would be, my answer to this point.
But I think we have shown that we can create a lot of capital, and that's why I also pushed to take a certain approach on the rulings. On the lengthening of the days, I think there are two effects which more or less offset each other. So on the one hand, you have a lower discount in time for APIs. On the other hand, you have less rescheduling, so the two will more or less even out.
Okay. Thank you a lot.
The next question is from Manuela Meroni of Intesa Sanpaolo. Please go ahead.
Good evening, and thank you for taking my question. So the first one is on the Common Equity Tier 1. At the end, you end up with a 14.1% Common Equity Tier 1. You guided for 13.2 , 13.5 , just one week ago. So I'm wondering to and I would like to understand what has generated this change between last week and today. The second question is on the securitization that you are working on. Could you please share with us what is the size of the securitized portfolio? What is the timing that you are expected to have, and what will be the recurrent impact on your profitability? The third question is on the calendar provisioning.
I would like to know if you can share with us what is the impact of the calendar provisioning that you are assuming in 2026 and 2027. Another question on the portfolio, the negative court ruling portfolio. I'm wondering if it is exactly the same of the contagion portfolio. And finally, I would like to, you know, do a confirmation about the fact that you are going to pay the coupon on the additional tier one. Thank you.
Thank you. On the Common Equity Tier 1, as I said, in various calls, I prefer over-deliver, so there was a buffer in my best estimate. And frankly, I think we were very efficient in the way we managed our balance sheet at the end, so that was a positive surprise, and I hope is the first of many. The securitization, as I said, we have been working on it. The actions that we undertook one week ago were also a result of this work. It's a bit too early to give you now the portfolio. I think obviously, if we do it, it's gonna be positive for the bank, otherwise, by definition, we will not do it. Okay, and it's not in the estimates that we have provided to the market.
I think you have seen the recent impact of the two periods, you know, in terms of capital creation, yeah. This costs a few basis points in terms of cost of risk in 2025. So we have huge levers to reduce the RWA once we do a securitization, is not in our estimate. On the current provisioning, I can give you the number for 2025, which is not negligible, so we already taken some impact in the course of 2025, and stands at EUR 50 million. We are gonna change the disclosure on this, but obviously I can't give too much detail on this call. What I can say is that in our estimates, the risk of collateral is fully manageable with internal actions, without taking into account the securitization. We have reduced it.
If you look at the contagion portfolio, we have been continuing to reduce it. We have actions, managerial actions in mind to put in place in the first half of the year. Related to this, I think there was the question on negative rulings and overlap with the contagion portfolio. By memory, it should be around 50% overlap. So what we did there will have an impact also on the calendar, and frankly, possibly on the securitization. Because as you can imagine, the focus will be for the securitization to address the contagion portfolio. We have no reason to get rid of invoices, which are past due, but we collect in two months. As we have shown, we have collected already 50% of the past due that we had at the beginning of 2025.
So that, that's how weak the rotation of our portfolio is. On the AT1, I'm surprised that you asked the question. I think we already paid the coupon in January with a buffer of probably 4 or 5 percentage points on our Req. So we have plenty of capital to pay any coupon that may be needed. And as I said, it was not an easy decision, but the decision that I support not to pay a dividend now. So for sure, we need to pay in January the coupon on the AT1. We will continue to pay the coupon for the foreseeable future.
Thank you.
Next question comes from Davide Giuliano of Equita. Please go ahead.
Hi, good evening, and thank you for taking my question. I have some. The first one is on the business outlook. I know it's only been a week, so perhaps it's still too early. Have you noticed any concern or impact from your customers regarding recent events, particularly with regard to factoring business and the custodian bank customers? The second one on the rulings, can you give us an idea of the credits that are still in legal dispute in the first instance of the judgment, not yet receiving either a positive or negative outcome? And do you see a risk on on these credits going forward?
The third one, on the contagion portfolio, can we assume that the decline in contagion exposure from EUR 296 million in Q3 to EUR 269 million this quarter is entirely attributable to the adjustments made, or have you recovered something? Can you give us some details on the moving part? And the last one, regarding CET1 , looking at capital in absolute terms, can you provide us with the moving parts that occurred during the quarter? Because at first glance, it would appear that there was a negative impact of approximately EUR 20 million that I cannot reconcile. Is it related to calendar provisioning you were referring before? Thank you.
Okay, thank you for your questions. On the business outlook, and related to the reaction of the recent announcements, frankly, we have had negative surprises when Bank of Italy imposed dividend bans. What we did last week was a surprise. The market reacted in a certain way, so already I thought it was a negative surprise, but these were actions that we understood, thinking about the next few years of the company. So I would be surprised if, apart from rumor on the press, any of our clients would have had any negative reaction. Our factoring lending clients need us, do business for them. In the custody business, I've had a couple of calls with some of our 300-odd counterparts to explain the situation. I've not seen any negative signs. So nothing really related to what was announced.
The business outlook for the year in general is the one that we gave last week with, with the, with our new target of net income. And as I said, I hope, I hope that the surprise on the Common Equity Tier 1 is something that can be repeated in the future. Yes, on capital, you are right. It, the difference report cannot reconcile was around EUR 20 million of calendar provisioning. Probably was a bit less that we had in the, in the quarter, but that's what you are not unable to reconcile. We, of course, in our estimates for the provision, we take into account of whatever is not is not included or in the judgment.
Our estimates for 2026 already include the impact of what is not under negative court ruling, but that may go under negative court ruling. Of course, it's an estimate, because if we knew it, it would go into negative, then we would take the provision this year, but it's definitely in our number. I hope that answers all your questions.
Just a follow-up. Just a follow-up, sorry. Thank you for your answers. Just a follow-up on the contagion portfolio. Is the reduction entirely be attributable to the provision you have made, or have you recovered something during the quarter? Just to understand the evolution of-
No, we have recovered. So that's not gonna, it, it's a mix of due to probably the collection was higher than the impact of the gains.
Thank you.
The next question is from Simonetta Chiriotti of Mediobanca. Please go ahead.
Yes, good evening. The first question is on volumes. There is a drop in the last quarter, which is around 13%, excluding Poland. Could you elaborate a bit on this? So what happened in the quarter on the commercial side? And what are the assumptions on volumes and loan growth in the guidance for 2026? And another question on the provision that you made on that portfolio, do you always have the right to retrocede the asset to the seller, no matter what? I mean, in any case. Thank you.
Thank you for the question, Simonetta. On the volumes, I think fourth quarter was underwhelming. So we accept that we've incorporated this trend in the estimates for 2026. We did not provide the detail of volumes for 2026, but as we wrote in the last week's press release, that's one of the key reasons we have revised the budget. The announcements that we made last week also took a lot of management time. That's not an excuse, and we know that we have to do more. Or we can do more. And our budget, frankly, in terms of net income, is not overly ambitious. The second question on the,
Yes, on the right to,
On the right to put back the receivables, yes, we always have the right to put back the receivables. So the right is there, and it's very clear. The credit that we buy, they have to be certain, liquid, and collectible. That's what we have in every single contract with our client. I'm not aware of any exception, but that's the. These are the three keywords that we have in our contracts. If they cannot be collected because there is a negative court ruling, they can be put back to clients. Now, why did we take the provision so that we are clear? We took the provisions because there can be a different interest rate between LPI rate and retrocession rate. This impact is exacerbated by the fact that ordinary legal actions take a long time.
There may be residual risks, for instance, in cases where our client has gone bankrupt, but as you know, we work with large multinationals. So when I think about my cost of risk, let me remind, our counterpart is the state. If you look at the underlying cost of risk, our counterpart is the state, and we have a recourse to our clients. So when we compare our cost of risk to that of a commercial bank, the credit risk should take into account these two factors. I have described it as a possible lower profitability, which I think is the right description for the provisions that we took.
Okay.
The next question is from Michele Baldelli of BNP Paribas. Please go ahead.
Hi, good evening to everybody. I have a few questions. The first one relates to the, let's say, negative court ruling. Let's say, because in the last reporting, you adjusted for those, and therefore, the adjusted net profit to identify was not impacted by this EUR 72 million. So I was wondering, on this net profit target 2026, shall we apply the same reasoning that you will not include in the adjusted net profit, this negative court ruling? The second question relates to the 54% that you disclosed of the Past Due that were collected in the last year. Can you give us an idea, since the start of the investigation of the Bank of Italy, what could be the same percentage?
Therefore, how much it is still present in the balance sheet, in the, let's say, total past due since the start of the investigation. Finally, the other point was more on the, let's say, nominal credits, the EUR 400 million that you have on the negative, on total nominal. How much are, let's say, related to the contagion portfolio, and how much is outside? Just to understand the... if there is anything in the past due, and in case if some of those, of these EUR 400 million are also outside of the past due. If you can give some visibility, please. Thank you.
So, the portfolio, I start with the last question. The portfolio of EUR 400 million, but what is the gross book value? The net book value is lower because as you know, we accrue for only around 65% and probably lower percent of all the accessories. As some overlap with the contagion portfolio, I think I said it's around 50%, so that will have an impact. There may be, and, there certainly is something which is not in past due. It's a small, it's a small number. I don't have, here the number of what we collect since Bank of Italy investigation. However, I can give you a sense of in terms of capital and invoices we collected, of things that we bought in 2023, we collected around 90%-95% of those invoices. So that's a healthy number.
So our front book rotates very quickly. On the court rulings, we treated the one-off this year as a one-off because it was a conservative change in provisioning policy. So it was, which was the result of a backlog of several years. For next year, it won't be a one-off. It will be in our numbers and is in our numbers. And I answered before one of the calls asking: "What is the number?" We don't give the number, but as you know, 72 is the result of several years. You can form a view of what the number can be. What is not in our number is the impact of the positive rulings. Okay? So not only we are not accounting for them today, but also we have not included them in our budget.
Okay, thank you very much. Just a last one, a curiosity. The assets of the Ecobonus, until when you can, let's say, use them, collect them, and how much of those you can sell?
We have really two parts of the business model to this. We have very clear portfolio, which we buy and sell, but we only buy once we are certain that we can sell. And then we have another part which we have collection curves that go down another couple of years. That's the best estimate I can give you now.
But it's basically five years, if I remember well, the legislation. Do you agree?
Around five years, yeah. We have another couple of years left.
Yeah. Thank you very much.
The next question is a follow-up from Simonetta Chiriotti of Mediobanca. Please go ahead. Ms. Chiriotti, your line is open.
Yes, thank you. Sorry. So my question is on future provisions. What happens if you have a negative ruling in second degree? Should we expect further provisions? And second, assuming that you have now a more conservative approach, do you. Can you help us to understand if there are other areas where you could start provisioning? So, for example, if you receive an opposition to an injunction, or considering the collection process in general, can you help us to understand if there are steps that could trigger further provisions? Thank you.
Thank you for the questions, which are very detailed. So on future provisions, most of the provisions are related to first order rulings, also because we assume that we are unable to turn around the vast majority of them. So if there is an effect, it's a second order effect. On the injunctions, as you know, it's a very quick process, which explains why I'm much more positive on the effect of this post-2027. It's a very quick process. We know what is missing. If we were to lose, we would know immediately after three months what is missing. If the client give us what we need, we can go under appeal, otherwise we put back the receivables. That's the way we are going to run the business.
As a reminder, if you have a question, please press star, then one. Mr. Sica, there are no more questions registered at this time. So this concludes our question- and- answer session. I would like to turn the conference back over to Giuseppe Sica for any closing remarks.
I would like to thank all the participants, and I look forward to speaking to you again when we present our first quarter results. Thank you very much, and have a great rest of the week.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.