Good morning, ladies and gentlemen, and welcome to doValue full year 2021 preliminary financial results presentation. I'm Alberto Goretti, Head of IR at doValue, and I'm here along with Andrea Mangoni, our Chief Executive Officer, Manuela Franchi, our General Manager of Corporate Functions and Group CFO. As usual, we'll go through the presentation in 30 minutes and leave 30 minutes for Q&A. Without further ado, let me hand it over to Andrea to get started. Andrea, over to you.
Thank you, Alberto. Good morning, everyone, and thanks for joining us today. I'm very satisfied with 2021 results. Starting from page 3 of the presentation, the year that just closed has been a record one in terms of origination activities. We have secured close to EUR 15 billion of new GBV, composed by more than EUR 10.3 billion of forward flow, and more than EUR 11 billion of new mandates, exceeding by a wide margin our initial targets for 2021. The year 2022 has also started very well, with about EUR 1.5 billion of new GACS won in Italy, as well as a EUR 500 million mandate won in Greece from Fortress.
In addition, we have signed an agreement with a major Italian bank, with which we had not working in the past, for a pilot project for the management of a portfolio of granular early arrears starting in March with our new platform exported from Greece. This is the first tangible sign of what we have discussed during our Capital Markets Day at the end of January in terms of our willingness to broaden our reference market beyond NPLs and UTPs. In terms of financial performance, we have beat our guidance for 2021, both in terms of EBITDA and net income, with a strong EBITDA margin of 35%. The exceptional performance was mainly driven by a very strong fourth quarter, where we experienced a strong collection performance, and the normalization of the operating environment in terms of auctions, foreclosures, and cash costs.
Collection rate now stands at a solid 4.3%, well ahead compared to the level of 2020, but also above the pre-COVID level of 4.2% in 2019. In terms of financial leverage, we have now achieved the lower end of our target range, and we can therefore accelerate our dividend payments starting from EUR 0.50 in 2021 and growing from such level at a rate of at least 20% per annum. As already mentioned, we are now in a fully normalized environment as far as cost activity is concerned. The expectation is that new NPE generation will pick up in 2022 on the back of the end of moratoria across Southern Europe last year.
On page 4, we have had a record year in 2021 in terms of origination and mandates secured. We have exceeded our target for forward flows by a multiple of 1.6, and have exceeded the midpoint of our target for new mandates by a multiple of 1.4. As mentioned, we have already secured about EUR 2 billion of new mandates in the first 2 months of 2022, and we expect to meet or possibly exceed our overall target of EUR 13 billion-EUR 14 billion of inflow for the year. Moving to page 5. On the back of our pretty strong fourth quarter, we have been able to beat our guidance, both in terms of EBITDA and net income.
We are now at the bottom end of our leverage target range, and we are confirming our dividend per share indication of EUR 0.50, for 2021. As mentioned, we expect to pay at least EUR 200 million of dividend for the years 2021 to 2024, and we have other levers, including the share buyback, to potentially increase these distributions. Page C is on Q4. The last quarter of 2021 has been particularly strong, with gross revenues growing by a multiple of 1.3x quarter-over-quarter. EBITDA growing by a multiple of 1.7x, and cash flow growing by a multiple of 1.8x. As a reminder, the two quarters are fully comparable in terms of consolidation perimeter.
Clearly, the last quarter of last year shows a full normalization of the operating environment. Also, it's worth mentioning that our business in Greece continues to perform pretty much ahead of our underwriting business plan, which is something we are extremely pleased of. Moving to page 7. We discussed a lot about the doTransformation program during our Capital Markets Day. Here we give you some indication of the activities we have carried out in the last few weeks, such as the merger of two NPL platforms into one state-of-the-art in Italy end of January, or the full onboarding of the Frontier portfolio at the beginning of February in Greece. As a reminder, doTransformation represents for us a complete overhaul of our operational model, and will require investment in terms of money, effort, and focus.
We expect it to yield substantial results from 2024 onwards. Page 8 is on our pipeline. In terms of origination activity, here we can show already some early signs of wins by doValue. In particular, we have won two important GACS in Italy for a total value between EUR 1.5 billion and EUR 2 billion as well as portfolio in Greece from Fortress for an additional EUR 500 million. We are working on all the potential transactions listed above, and hopefully we will be able to give you positive news in due course. As far as Sareb is concerned, there is no relevant news today versus what we discussed during the Capital Markets Day, and we still expect Sareb to make a decision in the next weeks. Moving to page 9.
I can say I'm very proud of our results in 2021. I believe these results make us even more confident about our business plan targets presented a few weeks ago. As you know, 2022 is going to be a transition year, mainly due to the Sareb, but also because of the investment required in order to transform our operational machine. I'm confident we will go back to a growth trajectory in terms of EBITDA from 2023 onward. Our EBITDA margin will reach 37% target by 2024, and our cash flow generation will remain strong. On page 10, a few words on dividend. As you know, we have upgraded our dividend policy in order to give our shareholder more visibility around the distributions for the next three years.
We will recommend to the board of directors a dividend of EUR 0.50 for 2021, which is set to grow by at least 20% per annum to 2024. Considering the strong expected cash flow generation for the next three years, our current dividend policy will still leave us scope to perform M&A. Without material M&A, I think we can definitely increase our distributions even further. Now let me hand it over to Manuela for the second part on the presentation. Over to you, Manuela.
Thank you, Andrea. Good morning to everyone. Moving to page 12. In terms of key financials, our GBV has remained broadly stable in 2021. In particular, considering the tail of mandates won but not yet onboarded as of the end of 2021, GBV stands at a pro forma level of EUR 168 billion, substantially in line with the level at the end of 2020. As you know, we just mentioned before that Frontier has been onboarded in February, so it's part of our actual GBV today.
Collection has grown substantially in 2021, partially due to the enlarged consolidation perimeter, but also due to the full normalization of our operating environment. This is further reflected by the collection rate, which stands at 4.3%, the highest level in the entire history of doValue, and very good results considering the restriction on the auction activity in Italy during the first half of 2021. Gross revenue grew by 36% or 20% on a pro forma basis if we consider FPS for the full year of 2020. Outsourcing costs decreased as a percentage of revenue from 12% - 11%.
EBITDA grew by 58%, mainly due to the triple effect of the large consolidation perimeter, the normalization of collection post-COVID, and the higher than average profitability of doValue Greece, which stands at 54% for 2021. Overall, in 2021, we recorded a strong increase in EBITDA margin by almost 5 percentage points from 30%-35%. Net income grew by multiple of 4.2x in 2021. On the back of growing EBITDA, partially offset by higher D&A, higher provision, interest costs related to the bond and higher taxes. Finally, last year we achieved a substantial deleveraging, bringing our net debt to EBITDA down to 2x from 2.6 at the end of 2020.
This has been mainly achieved through EBITDA growth, while net debt remains broadly stable as free cash flow activity was affected by M&A and other one-off items and was mostly dedicated to dividend payments. Moving now to page 13, regarding gross book value evolution. The movements in the gross book value reflect on the positive side, the mandates won in 2020 and onboarded in 2021, such as the EUR 2.8 billion Icon portfolio in Greece, as well as the mandates won and onboarded in 2021, including EUR 3.3 billion of forward flows and EUR 5.7 billion of new mandates won in 2021 and onboarded before year-end. Collections stood at EUR 5.7 billion, reflecting a record collection rate of 4.3%, well ahead of both 2019 and 2020 levels.
In terms of write-offs and disposal, the main items here is related to the EUR 3.5 billion Sky portfolio from Alpha Bank in Cyprus, which you know the bank has decided to sell by the first quarter of 2022, and for which we are carrying out today an advisory role for Alpha Bank in the management of the portfolio. We believe we are well positioned to win the management of the NPL portfolio once it is sold by Alpha Bank to a new investor, and we expect to give you some positive news on this point very soon. Disposal mostly relate to our business in Italy and partially Spain, but as customary, most of the EUR 5.8 billion of disposal were compensated by indemnity fees.
As previously described, the Project Mexico transaction with Eurobank in Greece is neutral from a GBV perspective and is not included in the disposal bucket. Although the indemnity fee was paid by Eurobank to compensate the delta between the initial fees and the fees associated with the securitization structure. Project Mexico has allowed us to enlarge our customer base by including Waterfall Asset Management, a U.S.-based investor very active in Greece. Gross book value has nominally decreased in 2021 by EUR 8 billion. We have more than EUR 8 billion of new mandates which will become GBV during 2022, including also Project Frontier already onboarded. Moving to page 14. Our business remains highly diversified in terms of client, geography, sector, and business type.
In particular, it's quite clear that while Italy makes about half of our GBV, the revenue contribution is highly skewed to the Hellenic region, considering the higher fees that characterize the market in Greece and Cyprus, the more recent average vintage, but also the fact that European contracts still reflect the initial fee agreed at the time of the FPS acquisition. This latest aspect is also quite clear in the difference in contribution of commercial banks in terms of GBV versus gross revenue, in particular in relation to the Santander and Eurobank fees, which still reflect the required remuneration of the capital deployed in purchasing those contracts. As discussed in many cases, the Sareb contracts expire in July 2022 and represented circa EUR 20 billion of GBV and EUR 25 million of EBITDA in 2021.
Considering the competitive nature of the Sareb process and the fact that no upfront payment is required by Sareb on the award of the new contract, fees are going to be materially lower than the current one, as discussed during the Capital Markets Day. Based on the latest feedback from Sareb, we believe that the contribution of Sareb on EBITDA is likely going to be limited to no more than EUR 2 million per annum from 2023. As anticipated by Andrea, we expect to hear back from Sareb in the coming weeks, and we remain positive on our position. Moving to page 15.
In recent years, we have complemented our historical core NPL product offering towards higher margin segments such as REO, UTP, and early arrears, which offer more favorable fee levels and structure. This is quite well reflected in the difference between GBV and gross revenue associated to those products, and our business plan foresees strong focus in further expanding our activity in these asset classes. Moving now to page 16. Gross revenue in 2021 grew by 36% on a reported basis, and 20% on a pro forma basis, considering the FPS acquisition from the beginning of 2020. The growth trend is also confirmed comparing the fourth quarter of 2021 with the fourth quarter of 2020, which are comparable from a perimeter point of view, with gross revenue growing by 35%.
All regions reported positive gross revenue growth, with Iberia being affected by one-off positive items in 2020, which made comparison more difficult compared to the other regions. The year 2021 also saw a relative decrease of the outsourcing cost as a proportion of revenue from 12%-11%. Moving to page 17. Operating expenses in 2021 grew by 26% on a reported basis, or 14% on a pro forma basis, but decreased as a proportion of revenue from 58%-53%. In particular, all items decreased as a percentage of revenue, demonstrating the positive operational leverage which characterizes our business, and the strong focus on cost control and optimization.
Let's move now to the EBITDA excluding NRI, which grew by 58%, as shown on page 18, or 27% on pro forma basis, with both Italy and the Hellenic region posting positive growth. The EBITDA trajectory in Iberia was affected by an increase in cost in 2021, partially due also to higher bonuses being paid in 2021 versus 2020. Moving to page 19. Collection performance is improving in all regions, yielding 120 basis points improvement in collection rates on a consolidated basis compared to 2020, a 10 basis points improvement compared to 2019. While the revenue contribution of the three regions is broadly comparable from an absolute point of view, it's quite clear that Greece and Cyprus contribute very positively to the overall profitability of doValue Group.
This is a feature which is likely to characterize our business going forward through the business plan period to 2024. As the Italian business fully recovers, Spain will deal with the Sareb negotiation in 2022, and Greece will tackle an attractive pipeline of potential mandates in the next few quarters. Please note that the calculation for the Hellenic region collection rate has been updated to reflect the full inclusion of FPS, which had not been included in the last set of results as of September 2021, as was noted in the previous presentation. Moving to page 20, the net income has increased substantially, both on a reported basis and also excluding NRI.
In particular, net income growth was driven by EBITDA growth, partially offset by an increase in D&A, an increase in provision for risk and charges, of which a large component recurring. Increase in interest costs due to the higher gross debt on the back of the FPS acquisition and higher taxes. As a reminder, 2020 was characterized by the tax claim item, which was classified non-recurring in the 2020 P&L and paid in 2021. On the cash flow, on page 21, this is certainly affected by certain one-off items which have impacted the conversion metrics.
In particular, the favorable payment terms agreed with Eurobank in 2020 at the time of the closing of the FPS acquisition have positively impacted the cash flows, as 2021 fees were cashed in at the end of 2020. In addition, the cash flow generation in 2021 was affected by the payment of the EUR 53 million Spanish tax claim and the EUR 5 million share buyback. Notwithstanding these events, we have now achieved the bottom end of our leverage target range of 2x-3x . Moving to page 22.
The bond issuance completed in July this year, and the full reimbursement of the bank debt specifically related to the acquisition of Altamira, has greatly improved the profile of our debt structure, moving from a mix of bullet and amortizing debt profile to an exclusive bullet profile, which is bringing a meaningful benefit in terms of cash flow generation to our business. Our average debt maturity is out almost four years, and we have also increased our RCF lines by EUR 55 million in January 2022, with the total RCF available now being EUR 120 million. Now let me hand it over to Andrea for his closing remarks.
Thanks, Manuela. Just to conclude, on page 23, I wanted to give you some final considerations.
First, we have closed the record year in 2021 in terms of inflow, and we have started 2022 on the right foot with already EUR 2 billion of new mandates secured. Second, pandemic is now in the past, and our operational activity is fully normalized. Third, our doTransformation program is progressing well. We will keep you updated on this, and hopefully you'll see the results of the program feeding to our P&L and cash flow generation in the coming quarters. Fourth, we will soon have more clarity on Sareb, which is an important milestone for us. We remain positive on the Sareb process, but as discussed in a number of occasions, Sareb is not a pillar of our business plan, and we can achieve the target we have set ourselves with or without Sareb.
Lastly, we have definitely shifted to a new paradigm in terms of dividend distribution, thanks to our leverage having reached our target. We believe this will give greater visibility to investors and support our share price. Thank you for your time and attention. We can now start with the Q&A session.
Thank you very much, Andrea and Manuela. As usual, to ask a question, you need to press star and one. I already see a number of questions being registered. Let's maybe start with Nicholas Binda at Intermonte.
Good morning. Thank you for the presentation. I have three questions. The first one is related to your 2022 EBITDA. I was wondering if you reiterate the guidance for flat figures, and if so, if the targets are related to the actual results or EUR 200 million or to the previous guidance, so EUR 190 million-EUR 195 million . The second one is related to Spain. If Spain in 2021 was 5% above the high end of the 2024 target. I was wondering if you see room to do better than what indicated in the business plan? Finally, I was wondering if you could provide some sensitivity of your business model to interest rates and inflation.
Any color would be really, really appreciated. Right. Thank you.
Well, thank you, Nicholas. In terms of your first question on our guidance for 2022, what we've said in the past was that EBITDA was expected to be flat, and flat meant flat compared to our previous guidance of EUR 195 million for 2021. Having now achieved the better than expected EBITDA for 2021, I think it's fair to say that probably EBITDA for 2022 will be marginally lower, again, mostly driven by the Sareb process. Certainly, we remain positive on 2022. The year started well in terms of the origination. You know, we'll keep you updated on the guidance for 2022 over the course of the year.
In terms of interest rates and inflation, the way we frame this internally is that, certainly, you know, higher inflation and higher interest rates provide, unfortunately, more stress to companies and households. All you know, this might exacerbate the distressed situations already in place, and that should lead to higher NPEs being generated in the system. On the flip side, banks benefit from higher interest rates, and therefore, you know, they should be accommodating a higher provision without stringent need of disposing those NPEs. Broadly speaking, I think these are items that are positive to our business in terms of generation of NPEs. When it comes to our P&L, sorry.
Lastly, I think interest rates and high inflation supports generally real estate prices, which should allow us to collect more on the secured part of the debt we have under management. When it comes to our P&L, you know, most of our debt structure is fixed interest. It's the coupon of the bond, they are fixed, and we don't have any maturities before 2025. You know, no impact in the short term from potentially higher interest rates. We have a very mild correlation with inflation in our OpEx. Yes, salaries are mostly in inflation, but you know, a moderate degree compared to the headline inflation you see being produced by the system at the moment.
On your second question, I think in terms of the business plan, I mean, we reiterate our targets, but clearly, you know, they were set on the previous guidance. Again, we'll keep you updated on that, and we remain fairly positive on the business plan overall.
Thank you.
Right. I think, the second in line is Luigi from Banca Akros. Luigi, over to you.
Yes, good morning. First question is on your servicing revenues. If you please can give us the split between the base fees and the collection fees. The second question is on the evolution of the cash flow for this year, 2022. Given that there will be marginal pressure on the EBITDA generation, and additionally, you are going to do some investments for the doTransformation cost-cutting plan, we have to expect, I think, a much lower cash flow generation and possibly an acceleration in the two following years. Does this affect your dividend policy, or we have to stick to a 20% increase in the dividend per share? Third question is on the collection rate. You updated the figure for Greece.
Is it possible to have a comparison for 2020 on the same base? Given that you are targeting a 6% collection rate in 2020 for the whole group, how do we have to look at it for the different geographies? I imagine that the collection rate in Italy will not triple or more than double, let's say. What do we have to expect going on? Many thanks.
Good morning, Luigi. You asked the first question was related to the split in the outsourcing revenue of the base and collection or of the total?
No.
Because on the out-
Of the servicing revenues.
Okay.
That's what.
Yeah.
was the information you were giving in the past.
Yeah. It's 33% is coming from the base fee and 66% from the variable. In terms of cash flow for this year, we have, as you know, from the Capital Markets Day presentation, sorry, on more than EUR 40 million payment on the CapEx side, also flat EBITDA. This makes us believe that there's still a positive free cash flow generation after before paying dividends and obviously before any M&A. Definitely our dividend policy is confirmed because we have defined it as the bottom of what we want to deliver to shareholders. The 20%, it's something we can only do better from.
In terms of collection rate vis-a-vis the previous year on the Hellenic region was 3.1%. Definitely a strong improvement in that area. While moving to the figures you see now, 4.3%. While on the Italian side, you've seen the results, and we think in the medium term, we will go back to the original guidance of 2.4%-2.6%. It's not going to be, you know, in 2022, but over the business plan horizon.
Okay. I think the next in line is Andrea from Equita. Andrea, over to you.
Yeah. Hi, thank you for the presentation. My first question is on the rumors about possible disposal of UTP portfolios by UniCredit. You have a forward flow agreement on NPL generation. If you can elaborate on how this may impact your business in terms of new inflows coming from the agreement with UniCredit. The second one is if you can provide us some indication of which is the contribution in terms of EBITDA to expect from Frontier already from this year. The last one, if you can elaborate a bit more on the provision for risk and charges, which were posted in the last quarter, so in the fourth quarter. If you can elaborate which elements are included in this item.
Thank you.
On UniCredit, the disposal process of the UTP stock from UniCredit will not impact our projections because first, our current projection in terms of new NPL inflow from UniCredit are extremely conservative. Second, we are currently discussing with UniCredit the extension of our current contract in terms of size. Again, the impact of the UTP disposal process currently underway will be definitively negligible on our results. Your second question was on Frontier. Yes, sir. The collection
Yeah. On the-
The collection of Frontier will start from the onboarding date. It begins February 7 this year. I hand over to Manu for the last one.
Andrea, if you don't mind repeating your last question because we were not able to catch it.
No, sorry. It is about which elements are included in the provision for risk and charges which were posted in the last quarter of the year. It means in maybe related to staff exit and things like that, but just if you can elaborate on which elements are included.
Yes, definitely. The first component is related to layoffs. You know we continue on our plan to reduce the personnel. Therefore, we have around EUR 10 million related to that. EUR 6 million are related to the adjustment for the value of the Sareb contracts, which obviously takes into account the new scenarios of fees. The other components are related to the adjustment. EUR 3 million is related to the adjustment of the price of the Eurobank contract because as it was contractually agreed, there was a final element to be defined based on the results of the company after 18 months from the closing period, which was due this year.
The remaining components are related to general risk provisions that we carry on our ordinary business, most of which, you know, have been there also in the past. Of all the components, probably the elements which you see every year is only the last piece.
Thank you.
All right. Thank you, Andrea. I think I have Andreas Markou from Berenberg on the line. Go ahead, Andreas.
Yes. Hi, everyone. Thanks very much for taking my questions, and congrats on the results. A few from me. I want to start with regional performance in Q4. If we do the math based on the numbers, I get an EBITDA margin for Italy, which is lower quarter-on-quarter, and this is a bit surprising given that Q4 is always much stronger quarter in terms of profitability because of seasonality. Spain has actually done much better versus Q3. Maybe you can comment a little bit here on those two regions, and then I'll come back to Greece. Thank you.
Yeah. On Italy, there is always the element of the group costs, which are pretty much flat over the years and where we accumulate also any potential extraordinary cost we have even in the normal activity. As you know, Andreas, we classify in the NRI only those related to acquisitions. You saw the amount this year given that we did a little acquisition related to BidX1, QueroQuitar, and also the transaction we did in this where we sold the notes to a new investor on Mexico. Obviously, we paid advisory costs to structure that transaction, but we also gained, you know, we had the capital gain related to it.
All that goes beyond these costs of extraordinary nature for us, they go in OpEx, and we classify them usually on Italy. Italy is a little bit like the absorbing point of all the elements. While if we look specifically to Iberia, as we said also in the Capital Markets Day, the performance in the last part of the year has really kicked up in an important way, also due to the new management in place, which is putting a strong effort on the operating machine, especially on the NPL side, which Andrea had mentioned is where we could have done better. This is already yielding results.
While the cost base had increased before more than proportionally to the results, take into account the changes also in the composition of the personnel that has happened with the inclusion of new managers including the CEO, the CFO, the effect of this new personnel is concentrated in the last part of the year and also obviously will be leading the performance from 2022 onward. This is also visible in terms of our scoring with our clients. You know, the reason why we are scoring very highly with Sareb, especially in the second half of 2021, is also due to these operating changes.
Okay. Sorry, just to clarify. Initially, you said about this kind of one-off costs you're taking, but, you know, I guess, the numbers you are giving us, I'm using EBITDA excluding NRIs.
No, in fact, I said that everything which is exceptional related to business, which is not NRI, we put always in the ordinary cost. We don't separate it. NRI are only for acquisition.
Yeah. No, no. That, that's clear. Thank you. Okay. Maybe now go to Greece, which Greece has been exceptionally strong, you know, more than something like 64% margin in Q4. I understand part of it is driven by the indemnity fee of Mexico. Can you tell us the absolute amount of that? So what would be the margin for Greece excluding this kind of one-off indemnity fee? And then if we look-
Yeah.
If we think of performance for 2022, you obviously have given us a guidance for the group, but how should we think of the different regions? Then what are potential risks? For example, the portfolio you're mentioning with Alpha Bank in Cyprus, my understanding this has gone to Cerberus. Again, what is the risk here that you actually might not keep the servicing mandate for this portfolio? And is there any other sort of risk you're seeing for this year? Now, we are kind of going post-pandemic situation, but as you said, you know, interest rates are rising, default rates are also rising. Are you seeing any potential risk for stress in real estate towards the end of the year?
Anything else that you know you are factoring in your guidance or which could be an emerging risk?
On the total indemnities for the group, we are pretty much in line with historical average, which is around EUR 20 million. Obviously, I mean, the total disposals were much bigger than the amount that included Mexico. Actually, on page 13, the disposals here do not include Mexico. So let's say that the Mexico allocation in this number is probably three quarters. Without this number, this would still have an EBITDA margin above, well above 50%, for the fourth Q.
In terms of guidance of margin by region, because of the reason we said on Spain, where due to the cost of Sareb, the contribution only specifically for the Sareb contribution was basically from 20 to 0. The EBITDA margin in the Iberia region will be just below 10%. For the Hellenic region will be above 50%. For Italy, it will be growing marginally from the levels of 2021. On the specific transaction that you mentioned in Cyprus, this is a portfolio we know extremely well, given that we have been managing it for a while. Since the acquisition.
The decision of Alpha Bank to dispose it, we took it off from our GBV, but we still have an advisory role. We feel very confident also about the next phase. We have a very good relationship with Cerberus. Even if they are not one of our core clients, you know, we have always had a dialogue with them. You will see that, you know, our origination capability go well beyond as we have demonstrated from our core clients. In fact, you know, we demonstrated it in Greece, we will demonstrate it in Cyprus, and now we have long track record in Italy of origination with many other clients which are not the shareholders.
In terms of the risk of the plan, I will address specifically the two points you mentioned, but leave to Andrea also to broaden the scope of the answer. Today, we are seeing the elements of defaults and stress not much impacting the collections, but really impacting in a positive way the production of new flows. We see a positive performance on the collection. Also on the real estate side, the prices are actually on the positive trend. Notwithstanding that, we have a conservative assumption on real estate prices in our business plan across all the countries. We are not including significant relevant upsides, taking into account that the situation of stress of the general economy.
Yeah. I think Manuela is right. All in all, we were extremely conservative in our business plan. The execution risk is low. It is low, even in a negative macro. Just to give you an example, Andrea, the average default rate with
In our number crunching exercise is between 1% and 2%. We are talking about extremely low default rate. Just to give you a benchmark for the current situation in Italy is a default rate well above 3%, so I think we were conservative enough, and with low execution risk. Based on the last few results, I think we can do better. We will update you, the financial community, during this year, but I'm definitely positive.
Okay, great. I have two more. Can I take them now, Alberto, or?
Sure. Go ahead. Yeah.
Yeah. Okay, great. So the first one is on the Ariadne portfolio in Greece. What is the timing of that? Again, what is your position and where do you stand versus competition? What's the likelihood that you will get that significant portfolio? Then the second is on M&A. Are you looking at anything else, currently? Anything that might come up this year? I mean, we've talked about kind of performing loan business, how you want to expand there. Should we be expecting anything in the next six months or so?
Yeah. On Ariadne. Ariadne is quite important project. It's a big chunk. We will participate to the competitive PQH bidding process. I think the non-binding offer date is set for next week, before end of February. We are positive because we will replicate for Ariadne the partnership with Fortress and Bain, and this partnership was successful in Frontier. Considering our positioning in Greece, we are positive on Ariadne, and this project is one of our main priority for this year. The portfolio, as you rightly said, is a huge one.
The competitive bidding process will be complex. Again, I think ourselves, Fortress, Bain, etc., we demonstrated our competitiveness in the Greek market, and so we can tap this opportunity, this so important opportunity.
On the M&A question, there are different processes which are described on page 8, which often entail some M&A, especially when they include sale of platforms with the forward flow agreement. One example is Starlight. Another one is the Portuguese project. These are already examples of, you know, projects where we are working on in our core business, which entail platform and forward flow that, you know, are critical and important for us. These are already in the process, so they are not expected to come. There are others that will come in the second part of the year, also in the Italian market, in terms of opportunity for flow agreements. Obviously, we will be focused on those.
There is the broader space of, you know, the fintech and proptech space, where we are enlarging our proposition. There, we will continue with the add-ons, small add-ons, which help us to broaden our reference market, but nothing which impacts in a relevant way our net financial position.
Okay, great. Thank you very much. Thank you.
Right. Thank you, Andreas. I think, next in line is Filippo from Kepler. Filippo, over to you.
Yes. Good morning. Thank you. I've got just one question very briefly. On the GACS, your portfolio, are you confident into a good recovery of the collection of this portfolio, and so you should exclude any risk of the penalties that you may incur if you not perform in terms of collection as expected by the business plan of the securitization? Thank you.
Yes. Yes. On that space. First of all, I think we are the leader by far in this market, because last year, last couple of years, we were more or less 75% of the transaction, the GACS transactions, I mean. We are not just the leader because of the origination capacity, but because our performance. Considering our current GACS portfolio, we do not foresee any risk in terms of termination, additional subordination, I mean, fee subordination, et cetera. We are currently on track on our target.
I think this is positive because it's not a common situation in this peculiar market. Some of our competitor is late in terms of being on track with the target, et cetera. I think this year we will see the start of the GACS secondary market because probably the investor will sell down to the market the asset. This will be an additional opportunity for doValue considering our unparalleled track record on it. Nothing of this is included in our current business plan.
The EUR 4 billion-EUR 4.5 billion acquisition we put in our business plan for Italy are before the impact of the secondary market plays.
Thank you.
I think we have probably a last question from Borja Ramirez Segura with Citi. Borja, over to you.
Yes. Hello. Good morning. Thank you very much for taking my question. I have only one quick question, and I apologize if this was already mentioned as I missed some parts of the call. The question is as follows. Given higher inflation rate in some countries, which is around reaching 6% in some cases as of today, and also potentially rising rates in Europe in the coming quarters, at least expected by the market, this may potentially affect the payment capacity to some extent. I would like to check if you expect any potential implications of rising inflation or rates on the default rates.
In that case, which segments or regions could be more impacted? Thank you.
Yes, Borja. It's a recurring question we get, and our view is that higher inflation, higher interest rates will put more pressure on corporates and households, and therefore will likely generate more fees going forward, which you know it's in a way positive to our GBV stock. In terms of the impact for us to collect, you know, remember that 75% of our GBV is somewhat secured to real estate assets, and inflation tends to be a positive you know contributor to real estate prices. In a way, there's a positive support to our collection activity.
You know, as a reminder, you know, the big impairment in our collection activity was when courts were closed in 2020, and this is not happening anymore. We don't see an issue with, you know, higher interest rates and higher inflation in terms of our ability to collect.
Yes. Thank you. Sorry if I may have not explained myself correctly. What I meant to ask is not on the collections, but rather in the default rate going forward. So NPE-
Default rates will increase because of higher inflation and higher interest rates because essentially more costs to corporates and households. That is, in a way, you know, a contributor to growth in GBV, you know, or contributor to more NPEs on banks' balance sheets.
Very clear. Thank you very much.