Good afternoon, welcome to BFF Banking Group Market Update 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 the 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 Giuseppe Sica, Group CEO. Please go ahead.
Good afternoon, everyone, and thank you for joining today's market update call following the publication of our press release regarding the approval of the draft annual report and the consolidated financial statement as of 31st of December 2025. As you will have seen in the press release, the figures released today include the changes compared to the consolidated financial accounts presented on the 10th of February 2026, and take into account the effects of the initiatives adopted by the bank following the Bank of Italy's regulatory measure. Let me remind you that we'll publish our first quarter 2026 results and host a call on the 11th of May. We will provide details related to this period. I would like to take a moment to walk you through the key updates in today's announcement before we open the call to Q&A.
There are four key elements that led to changes compared to the numbers presented on the 10th of February. First, the declassification of factoring exposure in past due resulted in an increase of EUR 1.4 billion. The declassification includes two components. The first is related to the inclusion of late payment interest accrued and not yet collected in past due exposures. These results in the classification as net past due of a total amount of EUR 770 million. The second component reflects the adoption of a more stringent interpretation in the use of mitigation tools to suspend the calculation of past due days. This has led to declassification of further EUR 590 million. Please note that the potential calendar provisioning would be applied starting from the first quarter of 2028, consistently with the methodologies adopted in previous years.
Second, we took further provisions of EUR 29 million related to negative court rulings. Following the regulatory measure and within the framework of the new internal policy adopted in February 2026, we've applied even stricter valuation criteria on negative court rulings. As a result, further provisions for negative court rulings as of 31st of December amount to EUR 104 million. Third, higher provisions from certain non-performing exposure amounted to EUR 16.4 million. This covers both direct exposure and legal actions against debtors with assigners subject to insolvency proceedings. Finally, there was, as already anticipated in our previous press release, EUR 3.4 million from the updated restatement of 2024 financial statement, arising from cash allocation within the Factoring & Lending business.
Let me say that all these four elements were already present in our press release following Bank of Italy measure, and this is a quantification of those impacts. Let me now explain the impact of these changes on the profit and loss and balance sheet items, as well as the key metrics for our asset quality and capital position. The 2025 adjusted net profit stands at EUR 140 million, and the reported net profit at EUR 37 million. The year-on-year development for the latter is primarily attributable to the impact of non-recurring items. Let me also emphasize the underlying business trends presented in February haven't changed.
Our deposits in transaction services have grown 15% year-on-year, and PBT for the division has risen to around EUR 50 million, which would be significantly higher if the liquidity were to be invested in BTPs compared to the current overnight remuneration. For instance, Payments will generate a PBT of around EUR 70 million by investing in Italian government bonds, and Securities Services will generate EUR 50 million PBT by investing in Italian government bonds. Regarding the loan book, our focus, and I will comment on that in a moment, is on profitability rather than pure growth. Let me move to the balance sheet. As of 31st December 2025, consolidated total assets were EUR 12.13 billion, and Italian government bonds represent around 40% of our total assets.
These are risk-free, and the associated capital gain deriving from the mark-to-market is not included in any of our projections. Regarding BFF past due exposure following the reclassification, the net past due amount at the end of 2025 amounted to approximately EUR 3 billion, which is the vast majority of our loan book. It's important to stress, as somebody else has noted, that despite the development in the past duration, the underlying risk remains small, due to the exposure being entirely towards the public administration. When I talk about underlying risk, it's the underlying credit risk. Finally, let me walk you through the updated capital ratios as of December 2025.
The CET1 stands at 9.94%, above the SREP requirements of 9.80%, while the total capital ratio stands at 12.3% compared to 13.3% SREP requirements. As a result of this minor miss on the total capital ratio, the board of directors has approved today a capital conservation plan to be sent to the regulator to ensure stronger oversight and greater effectiveness of the remedial actions we will take. Let me remind you that we take these actions with the commissioners present in our boards, and the commissioners have also participated in the drafting of the in the sessions of the board related to drafting of the annual reports.
Based on our projections, there is no capital shortfall compared to SREP requirements, neither in 2026 nor in 2027, assuming a slight deceleration of volumes in these two years. We have two years to address any potential shortfall in 2028, which may derive from conduct provisioning. We have prepared and discussed specific recovery measures and alternative scenarios that allow us to mitigate the risk of 2028, and we are working on a number of initiatives with the leading advisors. The actions aim at enhancing the value of specific assets and portfolios. The reference here is made to securitization. The focus remains on maximizing value creation. In this context, we have awarded mandates to Mediobanca and Stanley, while JP Morgan and PwC continue to work on the potential securitization.
Let me now close with a few remarks on 2026. Our targets have been updated to take into account the more conservative development of volumes, which is part of the recovery plan. Despite these, slow down in volumes, we forecast an adjusted net income between EUR 115 million and EUR 140 million, and a return on tangible equity between 15% and 20%. Of course, this does not take into account the effects which we expect to be positive on capital of any possible securitization. Thank you for your attention. Let me now open the floor for Q&A.
We will now begin the question and answer session. To ask a question you may press star then one on your touchtone phone. If you're using a speaker phone please pick up your handset before pressing the keys. To withdraw your question please press star then two. The first question comes from Ibrahim Saar with JP Morgan. Please go ahead.
Hi. Thanks a lot for taking questions. Just a couple for me, please. First, could you share some color on the deposits activity, in particular on the transactions business in the last few weeks and certainly in Q1? Also, if you can give any guidance on your spot capital position today. Obviously, you had the benefit of four months of operating performance in Q1 and in April. Obviously everyone will want to know what you can say about the AT1 coupon and if you can pay it, and if not, what remedial measures are available to you. If I understood correctly, the securitization plan is still ongoing in parallel with what we're seeing now on potential M&A kind of headlines.
Just the final one, if you could, say anything about the solo capital position as well, please. Thank you.
Thank you, Ibrahim Saar. A lot of questions, some of these are not easy to answer because as I said, I will report the first quarter results, and I'm very happy to invite you to the first quarter results on the 11th of May , but I cannot make explicit reference today. There were some quotes, if I tweet, on at the end of March, saying the liquidity was fully under control. Also, cannot make a reference on the current capital ratios, as we say in the press release, we don't expect any breach of capital requirements in 2026. The trajectory is a positive one. On the AT1, I understand the question. The AT1 is based.
The coupon is paid on in July, it's based on numbers, end of the first quarter. We'll disclose them then. As I said, the trajectory is a positive one on capital, generally. We respect all the regulatory requirements at a solo level at the moment. On the securitization, we keep working, of course. The perimeter is under review given the changes that we've applied to our past due classification in at the end of March.
Thank you. Sorry, just one follow-up question. With respect to the investigation that was ongoing at the time of your last, when it was last reported, is that now concluded? i.e. is what we're seeing now the full extent of the measures suggested by the Bank of Italy, or is there investigation still ongoing?
Are you referring to the investigation? On the investigation, we are on the receiving end of any finding that the court may have. At the moment, we have received no communication, and so it's still a preliminary investigation.
Okay. Thank you very much.
The next question comes from Luigi Tramontana with the Kepler Cheuvreux. Please go ahead.
Yes. Thank you for the presentation and for taking my questions. My questions relate to the capital plan that you approved today and sent to the supervisors. We have been reading in the press that you may consider selling some of your activities, in particular in the Payments Services and in Securities Services. Can you please confirm these rumors or not? Alternatively, which measures will you consider? Thank you.
I have not, I've read these rumors. I've never said anything to that extent. That is certainly not part of our recovery plan, any disposal of the Payments or of the depositary bank activity. I think there was an article today on the press saying that these two activities continue to operate normally, and I've given you some indication of the underlying level of profitability of these two divisions. As there has been no deliberation from the board on specific actions, I'm not able to comment on other assets that we may consider disposing. Let me be clear that normally these, the consideration going concern, are based on a 12-month horizon. On a 12-month horizon, we don't have any breach. On a 12, on 24 months horizon, we don't have any breach.
We may have, if we don't do anything, a small breach in 2028. We have three years to take any action that may be needed.
The next question comes from Domenico Maggio with Jefferies. Please go ahead.
Hi, thank you for taking my question. Are your deposits from the securities business conditional on having an IG rating? Are these demand deposit? What I'm after is basically how quickly can the deposit go. You mentioned seems like you don't wanna clearly answer on the whether the AT1 coupon will be paid or not, something to wait for Q1. In your capital conservation plan, do you include the eventuality of coupon skip? I would think that you would be making pretty low savings on the interest, just around EUR 9 million. I was wondering whether that was included on the capital conservation plan. Yeah, that's all my two question.
On the AT1, I don't have much to add. I told you the trajectory is positive, but we have to see when we release the first quarter results.
Is it on the conservation capital plan, the eventuality of not paying?
We don't give all the details.
Okay.
Yeah. Well, that's two. Unfortunately, we have here to wait 10 days.
Okay, fine. I understand.
Mm.
On the deposit from the securities business?
The deposits from the securities business, only a small portion of the deposits from the securities business is depending on having non-IG rating. Any clients can leave at any moment or better. They can decide to leave, which means they could decide to change the depository bank, which is not an easy or quick process. Unfortunately, even if I still have an investment grade, some clients have may leave.
Yeah.
As I was quoted on the press at the end of February, I said that the liquidity is absolutely under control. I hope I have answered this question.
Thank you. The portion that you mentioned, it is mentioned a small portion is demand deposit. Could you quantify or give a rough number on the percentage-
Now, let me-
for the EUR 4.5 billion?
What I can tell you without giving numbers, because I cannot give you numbers, is that it's less than the volumes of factoring that I buy in a month. Even if I lose suddenly, and you will lose suddenly because this means that somebody may have to decide to initiate a process to change the depository bank and then select the depository bank and then transfer its funds and assets to the other depository bank. It's not an overnight process. What I'm telling you is that the liquidity that I may lose as a result of non-investment grade is lower than the volumes of factoring that I buy in a month. Okay? In other words, if I lose liquidity, I can just not buy for a couple of weeks. I don't see that scenario frankly.
Okay.
The reduction of volumes that I have, that we have in our recovery plan is a slowdown in volumes rather than anything else. That's why I made the comment that I prefer to focus on profitable volumes just than, rather than on volumes growth.
Thank you. Just one follow-up. You were asked before on the solo capital figure and said you're gonna wait for Q1. Don't you typically disclose the solo capital figure with the annual report? Shouldn't that be up today?
Sorry, I never said we will wait for the Q1 .
Sorry, maybe I misunderstood.
No. No, I never said to wait. The, of course, the solo figures will be included in the annual report. We respect all the binding measures, and we have a small breach of the total capital, including the direct. The trajectory, I expect it to be positive over time. We certainly, in our projections, with no breach at the end of 2026.
How small, if may ask on the total? Only on the total capital, and how small the breach?
Just one second. I think it's less, it's less than 1%.
Less than 1%. Okay, thank you. Just last one follow-up, sorry, then will be honestly the last one. On your capital projection,
Yes, significantly less. Sorry, significantly less than 1%.
Significantly less than 1%. Okay, thank you very much. Is there a need to do a securitization before the end of 2026 to get that capital projection?
No.
being positive
No, no.
The breach to disappear? One last question.
No.
Like linked to that, would you need to basically underwrite less business, I guess, to maintain that capital position or that positive capital projection? I think I got that from some of the comments you previously made on lower business volume and so on.
Yeah. No, we don't need the securitization.
Okay.
Neither in 2026 nor in 2027 to respect all capital ratios in our projections. Yeah, it's, as I said, it's a slight slowdown in volumes, which is fine. You still see the level of profitability that we have there is not what it used to be, but it's still a very decent level of profitability.
Cool. Thank you very much. Appreciate it.
Thank you, Domenico.
The next question comes from Shardul Patel with Citi. Please go ahead.
Hi. Just off the back of Ibrahim's question. The Bank of Italy investigation is still ongoing as per the press release today. Does the 2026 guidance include any expectation of one-off charges or further restatements, or can we assume that all remediation actions have been fully completed? That's my first one.
I think I'm sorry. Maybe there was a misunderstanding. When I responded to Ibrahim question, I was referring to the preliminary investigation by the court of Milan. I was not referring to Bank of Italy inspection. I take the opportunity to respond about Bank of Italy. As we read in the press release, the inspection is still ongoing. We have received this temporary or preliminary report, which is reflected in our report. Of course, I cannot rule out the need for some small adjustments, I hope. The range that we give is a relatively wide range in terms of profitability. At the moment, I think my past due ratio at the level of Italy is around 80%, 90%. There's little room for major changes in our RWAs.
I feel that the range that you have given may take into account what may come, which we don't know at the moment.
Okay.
Okay.
Given the timing, obviously we're coming up just 10 days before the first quarter, can we assume that then if in the kind of past couple of weeks, you've had to take kind of more restatements and so on, that that was kind of backdated onto the 2025 accounts, i.e., in 1Q, we shouldn't expect to see any one-off charges or restatements?
I don't want to talk about 1 Q. I think we have taken, the board believes we have taken what needed to be taken for year-end 2025. I don't think we can backdate things. We have taken a more conservative approach on things generally, no?
Okay. My second question would be, obviously also since February, you've done another EUR 60 million top up of NPE provisions, relative to the potential calendar provisioning impact coming this September, it's still obviously quite small. As I understand it, the guidance doesn't assume any securitization. Can I get your.
Yeah.
-expectation for assuming no external actions or securitization, what the timing of those calendar provision impacts for 2026 will be? Is it kind of lumped just in the third quarter or the second quarter?
The projections are based on third quarter, which is our interpretation. Yeah.
But-
That's when the impact of the classified portfolio, of the portfolio that was reclassified in 2024 is starting to come through.
Yeah. Given that in September you'll have some calendar provisioning needs up to 35% from 2024, can we assume then that provisions for NPEs, absent any securitization, will continue to increase up till September this year?
Listen, no, the provisions that we took are not related to calendar provisioning at all. They're not related to calendar provisioning.
Why haven't calendar provisionings, provisions been topped up then?
Calendar provisioning is not even an accounting measure. This is reflected directly into capital. You know, you would not even see it in our P&L. The calendar provisioning is a purely prudential measure which exists in the EU, does not exist in the US, but it's not an accounting measure. We couldn't possibly do that.
Have you taken any further than on the capital impact? As I understand, in February, there were EUR 50 million of calendar provisioning.
That's the number. The number is not changed.
Okay. My third question was on the negative court rulings as another, obviously, provision top up. Does that reflect less success in your court appeals currently, like what you've seen so far year to date?
I think what I said in previous calls is that we were assuming, just to go a bit more here, we're assuming, it all seems second-degree order we would overturn a very small minority of judgments. Now we are saying that for specific case, we are never overturning a judgment in second-degree.
Sorry, do you mind repeating that?
We are assuming if we look for specific cases, we are assuming that if we lose in first order in costs, we 100% lose also in second order. That's what our assumptions have at the moment, which means if we are a bit better than that, then we should recover something.
Okay. My final question is just to clarify, off the back of what you were saying with Domenico. You expect to breach the total capital SREP, is that in 2026 by significantly less than 1%?
No, no, no. I said I was talking about the 2025 individual capital ratios. That's what I was talking about.
Okay.
We don't have any breach in 2026 based on our projections.
Mm-hmm. Okay. Then off the back of that, just to confirm, the AT1 coupon depends on the group and/or the solo requirements. i.e., even if the solo requirements are met but the group is breached, that has an impact on the AT1.
On the group.
Okay. Thank you.
Thank you.
The next question comes from Giovanni Razzoli with Deutsche Bank. Please go ahead.
Good afternoon to everybody. I have first questions. The line of the answers so far was very bad, if you can also please try to improve it because I struggled to understand most of your answers. First question is on the EUR 28 million of additional provisions on the amount of receivables that were already part of the EUR 72 million and the EUR 16 million of incremental provision on NPL. As you mentioned, a strict classification policies, can you please be more precise or as precise as possible to give the market a possibility to understand why just a couple of months after these EUR 72 million provision, you had to take another EUR 28 million, and on top another EUR 16 million on NPL.
Specifically on these EUR 16 million of provision, what is the amount of loans which derive drove the provisions? The second question is on the securitization plan. You are still working on it, but while you are working, your numbers continue to be revised downward, the provisions increase, and the market has no, you know, concrete backstop plan. Can you provide us with a reasonable timeframe to fix your capital provision from here? I understand that there are many external factors which can impact this answer, but in my view, the market needs to know at least a reasonable timeframe to fix the position.
It seems to me that, to be fair, a very concrete option because the securitization is part of the plan that is ongoing for quite a long time, and yours seems to be still far from there. Third question on the breach, temporary breach of the total capital requirement. I was wondering if the guidance for net profit for 2026 is included in your guidance that you will instead be compliant with the SREP in 2026. The final question is a very top-down one.
Given the amount and the scope of the reclassification of the past due loans, it seems to me that you are applying a scenario where from the 181st day since the purchase of a receivable that is not paid that amount is in past due. If I look at the magnitude of the amount of the past due that you have vis-a-vis the Italian stock of loans. Is my understanding correct? This seems to be now the approach of the regulatory. Is my understanding correct? Thank you.
Thank you, Giovanni. I try to shout if the line is not good, we will try to fix it. On the provisions, I have given the key change on the negative sentences. As I said, we are now assuming that we do not overturn judgment in second degree. We had a small percentage before. This is the impact. It's more conservative. As you have seen on the last press release, following the provvedimento by Bank of Italy, there was in their provvedimento an analysis on these provisions. We have done our work and taken a more conservative stance. We have also taken some provisions on what are non-performing clients. These non-performing clients are clients to which we may not even have a direct exposure.
Actually, largely are clients towards which we do not have a direct exposure, but where we have the risk that even if we have a positive sentence and we fail to collect and we have to put back the receivables, we may have problems in collecting them. I think it's a very conservative approach to what is not even often a direct exposure.
From this, so, I mean, I don't understand why if you ever put back the loan to your clients, you had to take a provision on it. Is it because there is-
If-
-super go back or something?
If the client. There are clients that are non-performing, okay? Over time. Although we largely work with multinationals, there may be clients that are non-performing, and in these cases, we conservatively take the provision often even without having direct exposure to those clients. Okay. On the securitization, listen, I share your frustration, but I never said that I would do the securitization in the first quarter. I never said that I would do the securitization in the second quarter. I don't give you the timeline, but while I've done many securitizations in my career, this takes a bit longer. Thanks. I never said first quarter, and I never said second quarter. I obviously don't comment on your view of the capital increase, which is your view of the capital increase is definitely not a part of our recovery plan.
We don't have any breach of capital requirements based on our estimates in 2026, and that includes, of course, the total capital ratios. On the past due, listen, the situation is frankly even worse than the one that you depict. Basically, whatever we buy, we buy directly in past due, given that there is this 1% EBA rule. Generally, you're right in, I mean, that's a European rule on the 180 days towards PA.
I'm sorry, can you share with us on the EUR 60 million of provisions on those debtors which went, you know, which went bankrupt, on those large organizations which went bankrupt, what is the amount of the scope of the portfolio, which drove these EUR 60 million?
Listen, this is the top-up, so this is not the full provisions. We don't disclose the full provision, but it's a very significant provision for clients to which we don't have direct exposure.
Thank you.
The next question comes from Davide Giuliano with Equita. Please go ahead.
Hi, good afternoon, and thank you for taking my question. The first one is on the SREP requirements. Can you provide some details on the reasons why you do not expect a breach of the SREP requirements in 2026 and 2027, considering the calendar provisioning that is expected in September 2026? Is it all related to volume downsizing? Can you confirm that calendar provisioning will kick in in September and not in June related to the position that were reclassified in 2024? Second one on the business, how do you expect your long-term profitability to be affected given that you are now required to classify LPIs as well within past due?
Do you see this business as still profitable, and can you disclose LPI booked in P&L in NII, specifically in full year 2025? The last one, in the press release, you said that you will consider new, let's say, operating modalities in Factoring for the future. Can you explain a little bit better what do you mean by the new operating modalities in Factoring? Thank you.
[Non-English content], Davide. Listen, on the, on the capital generation, we have, you know, we are now in, we are discussing year-end results 2025. 18 months have passed since the declassification, and we have reduced the 2026 calendar provisioning by over 60%. We have other three quarters ahead of us. We have a very focused machine on the reduction of calendar provisioning, and our estimates embed the forecast that we have on calendar provisioning. They also embed the profitability of the business. While previously we had a significant growth in volumes, we now are trying to be more disciplined also from a pricing perspective on new volumes.
It is the way we see the business evolving in 2026 and generally also in 2027 with the calendar from the declassified portfolio in Q3 2026 starting to kick off. On the, on the business model, I think we talk about the securitization and of course, the securitization will have to include a higher proportion of LPI than previously thought. Because we collect capital very, very quickly. I think we have collected by now all, almost all, if not all, the portfolio that we bought in 2025. That is never gonna go in calendar. LPIs are a different story, and we have to manage those more efficiently. What that means, we have to see in the context of the new strategic plan.
I will get back to you on the LPI because I'm not sure we disclosed that to the market. Yeah. Listen, I know, what I can tell you is that there is a legend which I heard many times from investors, that there is a huge difference between what we collect and what we accrue. I can tell you that it's not a huge difference. Okay?
Yeah. Sorry, just a follow-up on the new operating modalities in factoring and sorry again on LPIs in the sense that now that you are essentially obliged by the Bank of Italy to reclassify immediately LPIs into NPEs. Of course, they will get 150% risk weight compared to the, I don't know, 20%, I don't know, in the past.
Yeah.
The weight, it was, so it's a completely different return on risk-weighted asset and thus on allocated capital. I was wondering if in the coming future, you could consider essentially not to ask for LPIs or just to change business model, let's say, to a more traditional factoring. Thank you.
Okay. Your calculations are mathematically correct. Okay? Now let me stress. We have three businesses in which we are market leaders. Okay? Two, that no RWA, no risk absorption, and create liquidity. One, which has at the moment a higher risk absorption, but it responds to client needs and in which we are market leaders. I think as we say, in the press release, we have to find new ways to make this business more profitable, more profitable from a capital absorption perspective, and I think this will be part of the strategic plan that we will have to present.
Thank you.
The next question comes from Camilla Cotta Ramusino with Anima. Please go ahead.
Hello. Thank you for taking my question. Well, I read that you basically were in breach to Umbrella Requirement 2 . I'm wondering if you are, well, in a position to think about issuing a new senior or, well, how do you see your access to debt capital markets today and about the AT1? Well, same question. You're thinking about your thoughts about what is going to happen to these securities.
First of all, we do not breach the regulatory binding requirement, so we breach the CBR. Okay?
Yeah.
So-
At the end of the day.
As you know.
You need to be compliant to the, well.
You want me to respond? There's a slight difference. We said that, based on our estimates, we will have no breach by year-end without external measures. To be clear, obviously then the press release was not very clear, external measures involves anything that implies going on the market. Our estimates don't include the issuance of any debt securities, neither senior, nor AT1 or nothing. Okay.
Okay. Basically you expect, well to pay the coupon of the AT1. Are you thinking about that? Is it included in your guidance or, well, in your recovery plan?
As I said, the coupon of the AT1 will be determined on the date as of first of first quarter, which we release on the 11th of May.
Okay. No color today about that.
No. Unfortunately, we need to wait 10 days.
Okay. Thank you.
The next question is a follow-up from Giovanni Razzoli with Deutsche Bank. Please go ahead.
Yes. Very quick follow-up on the SREP at year-end and your total capital ratio at year-end. In the press release you mentioned that you won't be in breach of the SREP at year-end without the external measures. I interpret this that you have not factored in any securitization, the effect of any securitization in that target, right? Just the capital generation, organic capital generation.
Yeah. That's correct. That's correct. That's correct.
Thank you. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Giuseppe Sica for any closing remarks.
I thank everyone for taking part in today's call and for the interesting questions, and look forward to speaking again on the 11th of May. Thank you again.