Good afternoon, everyone, and thank you for joining the full year 2025 results of Banca Sistema. Before starting the presentation, as you well know, Banca CF+ has announced a public offer for 100% of Banca Sistema shares. The offer period started on the 26th of January, and we kindly ask participants to avoid asking questions about the offer. I am pleased to comment on a very positive set of results in 2025, which allowed the bank to register the best profits of its history.
The past year has been characterized by a strong increase in revenues and profits, a marked improvement in capital ratios higher than the level registered at the end of 2024, despite the new classification of past due registered in the first quarter, in accordance with Bank of Italy findings, and finally, a positive trajectory of gross NPEs, which are declining quarter-by-quarter with an increase in coverage ratios. Let's start with full year operating trends. Revenues grew by 41% year-on-year, thanks to a solid growth in adjusted net interest income, which grew by 93% year-on-year, supported by a strong discipline in terms of asset spread and a positive evolution of cost of funding. The financial portfolio also contributed positively in the period.
Net interest income was positively impacted by faster collections, with a positive boost deriving from LPI, linked to several receivables under ECHR ruling, among which one position accounted for more than EUR 40 million. The robust revenues helped to offset a sustained cost growth, driven by some one-offs, such as consultancy costs linked to capital plan in the tender offer, but also some credit-related costs, which helped us to mitigate credit risk further with a positive outcome in terms of risk-weighted assets. Cost of risk was more or less in line with last 15 years average and benefited from write-backs on few positions. Thanks to the above-mentioned dynamics, profits went up by 68% year-on-year, totaling EUR 42 million, the best ever result for the bank.
One of the most significant aspects of the period was the bank's ability to achieve strong profit growth while simultaneously absorbing the negative capital impact of the reclassification of past due loans that occurred in the first quarter of 2025. As a matter of fact, gross NPEs grew in the first quarter by 75% quarter-on-quarter, due to the new classification of past due loans, in accordance with Bank of Italy findings related to mitigants adopted by the bank to reduce the effects of new defaults rules.
Several actions undertaken since the start of the year allowed the bank to reduce gross NPEs, which declined by 27% from the first quarter of 2025, with a sharp acceleration in the fourth quarter, with a decrease of 31% quarter-on-quarter, thanks to the collection of receivables by a municipality that had emerged from conservatorship status and was the subject of a ruling by the European Court of Human Rights, which imposed the government to ensure the enforcement of judgments that had not been complied with by the Italian debtor. But we will elaborate on this point later on during the presentation. Let me remind that despite the reclassification of those loans as past due, the credit risk remains unchanged, as 87% of past due loans refers to public administration.
On the capital side, all the actions undertaken in 2025, including among the others, SRT, disposals, new securitizations, faster collections, all part of the capital plan, allowed the bank to increase year-to-date CET1 ratio and total capital ratios, bringing CET1 ratio and total capital ratio, respectively, to 15.1% and 17.8%, well above minimum capital requirement and about 180 basis points higher than year-end 2024, when the reclassification of past due loans was not yet included in the figures. As for funding, retail funding still represents 70% of total funding. Term deposits decreased double digit due to lower funding needs in line with loan book evolution. Cost of funding at year-end 2025 was below 3% for the first time since 2023.
Turning to commercial performance, factoring turnover decreased by 13% year-on-year due to lower receivables bought from the pharma sector, which were ensuring low returns and lower super bonus contribution, as expected in our plan. It's worth to highlight that turnover decrease was higher at the beginning of 2025, or equal to -20% year-on-year. But quarter- by- quarter, we have been able to improve the trend. As for salary and pension loans, the outstanding went down by 19% year-on-year, driven by lower volumes and repayments, and with a positive trend in margins, thanks to the decalage of legacy portfolio. Pawn broking is growing at a healthy pace, thanks to portfolio acquisition and margin expansion.
Turning to the performance of the factoring division, turnover decreased by 13% year-on-year, due to lower exposure to national health service sector to reduce the risk of past due increase. Much lower receivables from Superbonus also negatively impacted the fiscal year 2025 due to the expiry of the tax shield by the government, which implied, as expected, lower receivables, which could be bought. The decline in outstanding minus 12% year-on-year can be attributed to more selective new production, higher collections, and some disposals. Non-recourse component accounted for 74% of the total outstanding, while tax receivables accounted for 10%. In terms of the breakdown by obligor, public administration accounts for 48% of the total portfolio.
The remainder consists of corporates, public companies, and companies pertaining to the entertainment business.... Moving to Slide 4, CQ dynamics are in line with what was envisaged in the plan, and we are ahead of 2026 targets as for credits outstanding. Turnover decreased by 27% year-over-year, and together with repayments, helped to obtain a decrease of 18% year-over-year of the stock of CQ loans, which reached EUR 573 million. The private sector accounts for 18%, while public sector employees and retirees count for 82% of the total. As for the pawn loans business, outstanding continues to grow, equal to +8% year-over-year, with total turnover, including renewals, equal to EUR 257 million in 2025, or +16% year-over-year.
The division is keeping its growth strategy through organic growth and acquisition of portfolios. The evolution of the outstanding has been impacted by a higher number of auctions, which have been done in the year to reduce the stock of past due loans. I turn the floor over to Ilaria to comment in detail the balance sheet and income statement numbers. Please, Ilaria.
Thank you, Gianluca, and good afternoon. Total assets decreased year-on-year by 7% due to lower customer loans, together with lower Superbonus loans. The 12% reduction in factoring outstanding was due to lower turnover, as well as some contractual resolutions, disposals, and finally, higher collections, while the 18% reduction in CQ loans was driven by lower turnover and repayments, but also EUR 60 million disposals carried out in the second half of the year. Pawn loans kept growing with a +8% year-to-date, also thanks to EUR 8.9 million portfolio acquisition and despite higher number of auctions completed. Italian government bonds, classified in the Held to Collect category, slightly decreased year-to-date due to the expiry of some bonds and amounted to EUR 50 million with a duration of 26 months.
While the bonds classified in the Held to Collect and Sell category increased by EUR 374 million year-on-year and amounted to EUR 1,154 million, and have a duration of slightly more than 16 months. Due to customers decreased by 8% year-on-year, driven by lower repos with customers and lower term deposits. The decrease in term deposits was driven by lower funding needs due to lower loans and helped to further reduce interest expenses.
Turning to revenue performance, total gross income increased by 2% year-on-year, led by factoring, which benefited by the collection of late payment interest linked to some position related to European Court of Human Rights, among which one position allowed us to cash in EUR 103 million in the fourth quarter, with a positive impact through PNL equal to about EUR 34 million and related to late payment interests, which were off balance sheet. The increase in gross income, together with lower interest expenses, helped to boost total net revenues by 41%. As far as factoring, commercial loans and tax credit revenues were down year-on-year, while late payment interest from legal action went up year-on-year, thanks to higher contribution from extra collection component, which more than compensated lower revenues from accrual.
The full year figures were also impacted by EUR 2.1 million loss from disposal of receivables, classified as past due completed in second quarter. The LPI from legal action include a portion of LPIs related to few positions linked to ECHR rulings, most of which are still off balance sheet. Extra judicial interests also grew in 2025. Superbonus revenues amounted to EUR 29.9 million, of which EUR 28.5 million from trading Superbonus. As regards to adjusted income margin, factoring margins increased year-on-year, thanks to the collection of receivables linked to ECHR rulings, and in particular, the big position collected in the fourth quarter I was referring to a few moments ago. Positive trend also in Pawn broking, +210 basis points year-on-year, and CQ business, +60 basis points year-on-year.
Looking at the breakdown of total income, adjusted net interest income increased by 51% year-on-year, thanks to an increased factoring interest income contribution, thanks to Pawn broking, higher revenues from financial portfolio, and significantly lower interest expenses due to lower stock of deposits and lower cost of funding, which dropped from 3.79% for full year 2024 to 2.95% for the full year 2025. In detail, factoring posted interest income contribution of EUR 122.2 million versus EUR 107.3 million in nine months, 2024. Pawn loans increased to EUR 18.5 million from EUR 14.9 million. CQ stood at EUR 17.9 million, slightly down from EUR 18 million. Treasury portfolio was EUR 29.5 million, up from EUR 22.7 million.
Trading Superbonus was slightly down year-on-year and equal to EUR 28.5 million from EUR 32.9 million one year ago. Adjusted net interest margin was supported by significantly lower interest expenses, EUR 114 million, down from EUR 146 million. Commissions were slightly up year-on-year as higher fees from Pawn broking and servicing offset lower commissions from factoring, which had benefited from a few big tickets in 2024, with significant fees attached. Overall, total income grew by 41% year-on-year. The bottom right chart, which represents the contribution to total income by business line, where the contribution of treasury portfolio is allocated to factoring, and CQ shows a relative increase of pawnbroking and a slight positive contribution to total income by CQ business after several years of negative figures.
Turning to the cost base, total costs have grown 18% year-on-year, driven by administrative expenses, while personnel costs were slightly up year-on-year. Administrative costs grew by 30% year-on-year and include non-recurrent consultancy costs, for example, related to the capital plan and other actions requested by Bank of Italy, but also some credit-related costs, such as credit insurance and SRT premium. Admin expenses also include higher costs related to Kruso Kapital and risk provisions. The increase in FTE is primarily linked to control functions. The next slide shows the contribution of individual business units to group profit, which stood at EUR 42.3 million. Factoring closed with a net profit of EUR 46.5 million. Still negative, instead, was a contribution of the CQ division, but the net loss reduced to EUR 10.4 million.
Pawnbroking division registered a positive contribution with EUR 6.2 million net profit, figure which is already net of minorities. All the figures include the contribution of the treasury portfolio allocated to the business divisions. As for funding evolution, the bank decreased retail funding year-on-year, with term deposits at EUR 2.26 billion, vis-a-vis EUR 2.56 billion in 2024. The decrease has been guided by the bank to achieve a more efficient funding structure, given the decrease in loans. The weight of retail funding on total funding was equal to 70%, stable year-on-year.
In terms of cost of funding, it was equal to 2.95%, vis-a-vis 3.57% for full year 2024, with a cost of wholesale funding at 2.63%, lower than retail funding, which was equal to 3.07%. I now turn the floor over to Gianluca for some remarks on asset quality and capital ratios.
Thank you, Ilaria. As of 31 March 2025, the bank classified past due loans, in line with the request made by Bank of Italy to exclude some mitigants in the application of new definition of default rules. The bank has since then, taken various managerial actions aimed at reducing the stock of past due loans. Among the actions undertaken, it's worth mentioning faster collections, contractual resolutions, portfolio disposals. All those actions allowed the bank to sharply decrease past due loans by -27%, vis-a-vis the level registered in the first quarter 2025. The collection of one position related to municipality exited from conservatorship and under ECHR ruling, has helped the bank to further reduce non-performing loans at a rate equal to -31% quarter-on-quarter in the fourth quarter of 2025.
Total gross past due loans at year-end were equal to EUR 221 million, confirming the trend in place, which sees a reduction of past due loans quarter-by-quarter. The pickup seen in the third quarter in past due was due to the reclassification of one position from bad loans to past due loans. Position then collected in full in the fourth quarter, with EUR 103 million cash in, and the booking of about EUR 34 million LPI through P&L. The amount of total LPIs off balance sheet, linked mainly to municipalities and conservatorship, are still equal to EUR 61 million. We remind that the new classification of loans requested by Bank of Italy does not change the risk profile of the bank, as 87% of past due loans consist of exposure to public administration.
Cost of risk in 2025 stood at 39 basis points. From the perspective of capital ratios, we have done an excellent job. Thanks to the improvement in asset quality, portfolio disposals, SRT completion, new securitizations, and faster collections, we have been able to reabsorb the capital hit registered in the first quarter, 2025, and to further boost capital ratios to a level that is higher than year-end 2024, when the reclassification of past due loans was not yet implemented. In particular, CET1 ratio and total capital ratio are today almost 180 basis points higher than year-end 2024, with capital buffers vis-a-vis SREP equal to circa 500 basis points. Capital ratio phased in does not take into account positive HTCS reserve for EUR 4.3 million net.
In conclusion, we are very happy for having delivered such a positive set of results, driven by solid revenues and cost of risk under control. The efforts provided to mitigate credit risk, to improve collections and reduce NPEs, have brought to much more solid capital, which should support future growth. Dividend ban by Bank of Italy has been confirmed for the time being, but today, capital position makes us more confident to be able to deliver sustainable, positive set of results in the future. Operator Rao, we are ready for Q&A session.
Thank you. This is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use the handset when asking questions.
... Anyone who has a question may press star and one at this time. First question is from Irene Rossetto, Banca Akros.
Yes, hello to everyone. A couple of questions from my side. Could you provide more details on the one-off booked this quarter related to the municipality? Are there other exposure like this, and how might they affect the future profitability? And then the second is about Banca Farmafactoring. They recently recorded a significant one-off provision related to a negative court ruling on its receivables. Do you have similar rulings on any part of your portfolio, and if so, can you quantify the amount? Thank you.
Thank you for the question. In terms of the collection of the one-off exposure, or one of the largest exposure we had, simply we got the ruling from the court in Strasbourg. After the ruling, we send an injunction to pay decree against the Italian government, and at the same time, the city went out from the procedure of conservatorship, and so we took action also against the municipality. Then the government, in their government balance sheet that has been approved, they put forward an amount, two amounts, actually. One that was a EUR 2.2 billion for any cases, including negative ruling of the European Court that the government suffer.
And second, also, a specific amount for city that exit conservatorship, where gave the money also to the to the municipality. The sum of all these action end up to for the municipality to pay us the full capital, plus 80% of the LPI that has been accrued at at that stage. We have other cases out of European Court. Some have been already resolved by the court, and we and already been paid by the court, by the authorities.
Other cases, just to give you a rough amount, there are about 30 position that are at court in Strasbourg at different stage for an amount of about EUR 30 million, out of which there are associated some impairment, in particular, if they are connected to consortium that by the Strasbourg court the consortium are treated exactly in the same way of municipality. Those outstanding include doesn't include the LPI, the late payment interest that are all off balance sheet and amount in about EUR 30 million.
As I said before, during the presentation, the amount of NPE off balance sheet linked to city municipality and conservatorship are about EUR 61 million. Out of those amount, EUR 30 million off balance sheet are already at the court in Strasbourg. So I hope that did give you the picture. In terms of negative court ruling, while I'm not here to compare with other banks, I can tell you our numbers without any comparison. Our net exposure on which the bank has received the negative court ruling are about EUR 24.5 million not yet returned to the original seller.
All ruling in order also to preserve the rights of the creditor are under appeal. As all the banks that do factoring, we all maintain the right to return the receivable to the original seller, so what we call the contractual resolution. What I can say is that the Banca Sistema usually does not even wait the negative ruling to do the contractual resolution when there are opposition by the debtor that our legal team consider grounded. So the ruling may come as a negative event, but we have already resolved the contract, and we already return the credit to the original seller.
This is part of the daily regular operational business, and in general, these occasional negative rulings are linked to utility bills that we actually chase from the largest Italian utility company with a very solid credit standing. What happen is that as soon as they reconcile the position, they pay us the capital, the contractual interest, and any other legal expenses that we have incurred. So what happen is that when we resolve the contract and we put back the credit to the original seller, we switch the exposure from the public administration to the original seller, with all the consequences in terms of RWA, and this is what you see in our numbers.
Part of our exposure that is not public administration are linked to resolution that we have a contractual resolution that we have put against the original seller, mainly utility companies. We also take action against the utility companies if they don't pay us. This is our working process. But just to give you the... Going back to the original number, the amount of negative ruling where we haven't take yet the contractual resolution is EUR 24.5 million.
Thank you.
Next question is from Lorenzo Giacometti, Intermonte.
Yes, good afternoon, and thank you for the presentation and for taking my questions. I have actually two. So the first one is, if you can share with us, some kind of update about, about your talks with, with the Bank of Italy, regarding the dividend ban, given, given that, your capital position is, strongly improving quarter- by- quarter, and you're, reducing, your, past due exposure. And, the second one is, if you could, I mean, share what, what are your thoughts about the, the, the trends, in the, in the salary-backed business, going to 2026? Thank you.
My personal thought, because we don't have anything specific or any date where we can say that there will be any ban, is that, as you know, there is a public offering ongoing, and I don't think that anything will happen until this will end in one way or in the other. In terms of salary-backed loan, we continue to maintain the position of originating the business only at yield level that we consider appropriate. And at the same time, when there are opportunities to sell portfolio, we will also sell portfolio, maintaining an outstanding that is not increasing, but maybe also declining.
As we see that, we can allocate capital to other asset class that have a higher return in our day, because, you know, the things may change over time. In the past, the salary-backed loan were with a very interesting return, now less, so things can change. So we can keep up, we'll keep up with the network the origination with the product, but we don't necessarily keep in our book anything we buy that we originate, but if there are opportunity, we originate and sell.
Okay, thank you.
Next question is from Davide Rimini, Intesa Sanpaolo.
Good afternoon, thank you for the presentation and taking my questions. I'll have just a few. One is back again on the announcement of your competitor earlier this week. They also sort of took a more prudent assumptions in terms of LPI collection time. I know that sort of you are coming up with the end of the year with these well-flagged collections from the municipality in conservatorship. I was just wondering whether you might comment on their terms moving from 3,100 to 3,400 days, and whether sort of you might insert- we might insert anything out of the market standard practice? The second question is regarding operational trends in factoring.
In the presentation, you highlighted a business contraction for the full year, but recovery in the last part of the year, which is seasonally the stronger than the heaviest. I was wondering whether you might reflect on what you expect from in 2026. And the last question is instead on securitization, is whether, sort of, you might update us on the prospect for the securitizing some receivables in the entertainment sector. Thank you.
Okay, thank you for the question. So first of all, in terms of what we can call it, the time value, let me say that not everybody has the same methodology on the calculation of LPIs and putting that on accrual. What we do is, and we always did, is to start to consider the accrual only for positions that we already take legal action at the time when we take legal action. So we purchase the receivable. We don't do anything. We try to collect in case. And that may go on for a few months, in some cases, also several months.
If we are not able to ordinarily collect, we start the legal action, and at that point, we start to put the late payment interest on actual. So, if and when the legal action will be initiated, is when we take the actual. In this context is also to want to clarify that expected collection time are regularly updated on annual basis with continued back testing with the differentiated assumption for each procedural stage of the court. Now, that all to say, that you don't necessarily can compare apple and apple, but this is each as a different number.
But just to try to find a comparison, we are currently, for the position that are in legal action, we are on average, assuming a time value of 2,800 days, corresponding to 7.9 years. Again, from the date we start the legal action. If we consider the due date of the invoice, so the original due date of the invoice, we are at around 3,000 days, okay? In terms of time value. The LPI accrued on the balance sheet for us is EUR 76.8 million. That is because that is the result. In term of turnover, if I understood correctly the question, we had a good start of 2026.
Our assumption is to increase the turnover compared to the previous year. This is also thanks to the securitization that we have put forward on the entertainment business. We have done two securitization, but these are not securitization of only existing receivable that we have in our book. These are ramped up securitization, so we put forward structure where is the securitization that directly buy the receivable from the client from the mainly football clubs in the entertainment space directly in the securitization, and the securitization issue a senior note and a junior note. So there is a commitment for a junior note from the junior investor, and a commitment of a senior note for the senior investor, which is us.
Both the securitization that we have done work in the same way. That allow us to increase the return, the RORAC, the return on regulatory capital because the capital consumption is lower considering that we only own the senior component still with the yield that is interesting and increase the return on regulatory capital allowing us to have more firepower also at the international level in this field. We have also considered, and we have worked on, the idea of securitization of Past Due, something that certainly is something that we consider.
But just to give you the idea, if we consider our current portfolio that is in past due, we are talking an amount that is lower than EUR 100 million of capital, with the impact in case we do it through the PNL at zero, because the value, the price is in line with the with our book value. Consider that our NPE component that has been accounted in our balance sheet is not particularly high, so any transfer will not imply a net loss. I hope I answered to your question.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Next question is a follow-up from Davide Rimini, Intesa Sanpaolo.
Yeah, sorry, just to follow up on the Superbonus activities. You highlighted, as in the previous calls, that the business would have been, and is actually sort of fading, as the benefit of the fiscal, the fiscal benefit is being gradually disappearing. I just wonder whether also here you might share with us a sort of a projection to this year. Thank you.
Clearly, there are no longer much to buy from the market, so the Superbonus, we are continuing to amortize what we have in our book. There could be a few further million of possible acquisition of portfolio of work that are part of the Superbonus that were not yet invoiced. So, that is the only part of that is going to be some up in the term of Superbonus. So we will continue to have the benefit of what we bought in the past for the next couple of years, and a few, not much more to add.
All the rest of our growth will come from factoring with public administration, and also the entertainment, and some also of private with guarantee insurance on the back of it.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Mr. Garbi , there are no more questions registered at this time.
Thank you very much to everybody. As you know, if the public offering will go through, I could say that I left the bank with the best ever result since I found it. Thank you.
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