Good afternoon. This is the Conference Call conference operator. Welcome, and thank you for joining the Banca Ifis full year 2023 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Frederik Geertman, CEO. Please go ahead, sir.
Thank you, madam, and good afternoon, everybody. Welcome to our 2023 results call. I'm here with my team, the CFO, Roberto Ferrari, and the investor relations person, Martino Da Rio, and the media relations team. I'll briefly illustrate the results as usual, and we'll take questions afterwards. I'll take you straight to page 4 of the presentation. We had an especially rewarding 2023, with net income at a record high, excluding PPA, at EUR 160 million. We exceeded our business plan target for the year by 17%. And we can now say that we met the net income targets of our plan, both in 2022 and 2023, with a full year in advance. Management overlays are unchanged against macroeconomic and concentration risks, so they did not contribute to this result.
It's purely industrial. We booked the costs for the integration of Revalea up front in Q4, offsetting the bad will of the transaction that followed from the acquisition of the vehicle at less than its book value. We have a very, very comfortable financial position, EUR 1.4 billion available cash, including counterbalancing capacity, after the TLTRO repayment that we carried out in December, so in advance of the actual maturity, and that's actually before additional liquidity coming in in January, which we'll discuss later. Dividends. Total dividends in 2023 sat at EUR 110 million, that's 2.1 euros per share. That's 60% in excess of the business plan target.
You will remember that of these, we paid EUR 1.2 per share in November in advance, and we're paying the remainder EUR 0.90 per share on May 23 of this year. Page 5, a look at the quarter. Net income was at EUR 35 million. Was EUR 34 in the Q3 and EUR 36 last year. Full year net income, as we said, at EUR 160 million. Revenues were EUR 192 million. That's +70% Q on Q. EUR 28 million Q on Q. All divisions contributing. Commercial banking confirming very solid commercial performance with the previous quarters, NPL business picking up as usual, Q3 was soft, seasonality.
And that was driven both by the classical workouts, some contribution of Revalea already coming in, and minor capital gains on the disposal of certain NPL portfolios. We sell those to keep the gross book value at reasonable levels. When we have worked out the portfolios, we tend to sell them at slight profits, and so there was some marginal contribution of that. Operating costs, EUR 119 million, that's 30% quarter-on-quarter, maybe linked to the renewal of the labor contract at national level. The fact that Revalea has started to contribute to the costs, a pickup in variable costs linked to the acceleration of NPL workouts, and I should add, some acceleration of costs of projects and costs to the benefit of 2024.
So those were business plan projects that we accelerated, and we booked the costs in Q4 of 2023. Significant improvement in asset quality ratios. Gross NPE ratio at 5.5%. It was 6.1% the previous quarter. Net at 3.2%. It was 3.9% the previous quarter. Loan loss provisions of EUR 22 million, including some prudent positions, provisions against specific exposures, so single names in commercial banking. CET1 ratio comfortable at 14.9%. Page six, look at revenues. Quarterly revenues at EUR 192 million. They are stable year-on-year. Looking at commercial banking revenues, EUR 86 million. Strong commercial performance and pricing discipline contributing there, more than offsetting the cost of funding increase. I will remind you that on Q4 2022, we had one-offs in disposals from structured finance.
We didn't have this year, so actually the picture is a bit more generous than it looks. NPL revenue is resilient at EUR 92 million, despite the inflation and the rate scenario that we had expected to impact the ability of our debtors to repay their loans. And the effect is quite mild, we should say. So that's really a source of satisfaction. Q4 2023 includes the first contribution from Revalea in terms of revenues. It's roughly EUR 5.5 million. Non-core & GNS, EUR 14 million, confirming a recurrent and stable contribution to revenues. Our finance is quite prudent in risk profile, as you know, and you've seen it contributing to this extent, quite in quite a stable way, right, in the last quarters.
Overall, I think we can say that we're delivering on the objective to offset the cost of funding increase that the market is generating. Page 7, commercial activity. We see a nice pickup that reflects the typical seasonality in Q4. Factoring turnover is roughly in line with the market, EUR 3.6 billion turnover. You might remember in the previous quarters, yet, that we had quite some market share growth. We see the factoring market showing some first signs of deceleration, so no contraction, but deceleration due to the economic cycle. We maintain as always, I would like us to state it, our underwriting and pricing discipline in all credit segments. Looking at leasing, underwriting volumes, if we look at the tech side, so equipment and technology, we're doing better in the market.
So since August, we've seen some delay of SME CapEx decisions, and I think that's what's reflected in the market. We grow far more than the market, mostly on the basis of commercial effectiveness. There was some pickup in December due to the renewal of the Sabatini Law, which provides incentives to the SMEs that we benefited from, as well as the market, but it was very late in the quarter. Automotive, we don't really optimize for underwriting market share in this segment because as you know, we focus on premium luxury segments rather than volumes. We maintain very rigorous price discipline, this being long-term lending, and we approach that with due caution.
And we tend to have marketing agreements in place on roughly 70% of what we underwrite, means that we don't have a risk on the value of the assets once the leasing expires. Very important, this, in the current market. So spreads on average at 3.93%, that's up 0.3% on top of the base rate increase. So very, very rigorous long-term lending price discipline. Page 8, NPL performance. On the left, you see quarterly cash collections. Once again, more than EUR 100 million. That's actually quite remarkable, given the, the cycle in which we are, the rate scenario, the inflation situation, modest growth, quite pleased with that. If you look at revenues on the right-hand side from judicial and extrajudicial recovery, EUR 89 million, good quarter. Extrajudicial picking up very nicely to EUR 37 million.
We keep monitoring the extrajudicial part, so those are the voluntary repayment plans. We had expected that to contract a lot more than we, than we're actually seeing. So it's definitely a confirmation of the resilience of this portfolio, and of the fact that, you know, small tickets, unsecured NPLs, represent a an interesting and profitable niche in the much larger NPL markets that obviously has very different dynamics. We have continued the sale of NPL portfolio tails. We sold close to EUR 1.9 billion of gross book value in the Q4 . We have sold already 0.7, and once again, 0.7 in the previous quarters, leading to significantly more than EUR 2 billion of gross book value sold.
Always, as we mentioned, that modest book profits, but consider it housekeeping. Keep in mind on these numbers that we don't include Revalea yet into them, okay? So these were all, comparable, like for like, with the numbers we showed in the previous quarters. Page 9, costs. This requires a little bit of clarification, I would say. Overall, we maintain the statement that we are countering the inflation impact by efficiency. What happened in the quarter? We booked EUR 190 million operating costs, up from EUR 112 million last year, and EUR 91 million in Q3. Couple of things happened there, Q on Q. We have, first of all, the EUR 7 million of the FITD contributions, so the recovery fund. Four million in recurrent costs of Revalea coming in, so those are industrial costs.
4 million that we consider seasonal, right? So the pick-off, pick-up in cost of lawyers and information providers that in Q3 are always soft. And another EUR 3 million that we describe as acceleration of projects to be completed by the end of the business plan period. So those are actually to the benefit of 2024. We include this year, right, EUR 31 million annual IT expenses. That's substantially stable. That's basically the execution of our key business plan projects in innovation and digitalization. The green bar, costs directly linked to NPL recovery, plus EUR 3.4 million Q on Q, the typical seasonality, not a lot of surprises there. And then cost of personnel increase, mainly due to the renewal of the National Labor Contract, right?
If we look at non-recurring items at the bottom of the slide, we have the integration costs of Revalea that we booked up front, mostly offsetting it against the bad will of the transaction, right? So you see EUR 8.5 million bad will and EUR 11.5 million integration costs. We won't see these again, therefore, in 2024. We expect, just to qualify the costs in Q4, that they are not representative of what will happen next year. Roughly, you should imagine that we'll have EUR 100 million per quarter of operating costs. Of course, with the usual seasonality, right? So Q3 will be a bit lower, and the other Qs might be a bit higher, but, you know, on average, that, that's probably what you should expect. Page 10, asset quality.
So it's EUR 22 million loan provisions in the loan loss provisions in the quarter. We didn't use overlays until now. In the Q4 , we had roughly EUR 10 million provisions on specific structured finance positions classified as UTP. We have, as I mentioned, the overlays, which are significantly in excess of 1% of our performing loan book. So at the very high end of the Italian banking system, overlays are a lot smaller in our competitors. So we had some headroom in Q4, as you can imagine, and we used it with our usual cautious approach to make some provisions on positions where we could. Those are, as I mentioned, single names, mostly, and there probably between 2 and 4, depending on where you cut it, significant situations.
On the top right corner, I want to draw your attention to the coverage ratios. Overall, they increased from 35% to 43%. To exclude from mix effects, we showed you the individual categories. So NPLs, adding 9 percentage points of coverage ratios, goes up to 78%. UTPs, adding 5 percentage points, going to 44%, and past dues, adding 1 percentage point of coverage ratio, right up to 8%. So we have a significant increase in coverage ratios, quite an improvement. Growth from 6.1 to 5.5, and if we net from the loans versus the Italian public health system, which do not, in our opinion, represent the material real risk, they're classified as past due, so we need to show them.
So net of those numbers, we have 4.5% gross and 2.3% net NPE ratios. So, we booked quite a reduction, also, as you see in the gray bar, right, from 1.4% to 1% gross, right? Quite a reduction in NPEs from commercial banking and from loans versus the public health system. They contract both gross and net. So all in all, this slide is, we think, quite good news, because when you have the ratios improving and concurrently, the coverage ratio, right, improving, that means that your book is showing signs of health. Page 11, little bit of risk indicators. We include these because we know that they are usually interesting from an analyst point of view.
Question always being, right, what do you see in the macro situation of the Italian economy, given our very specific role in the SME segment? So we put here things that we might consider forward-looking indicators. I think you've all seen the loan loss provisions in the Italian banking system still being quite low. So the question is, right, is something on the horizon that will, you know, maybe, you know, signal that, you know, we might have some deterioration in the next quarters or years? And the answer is no. We are not seeing in our client's portfolio, until now, I want to underline that, any sign of deterioration in forward-looking indicators. So payment days in factoring show no signs of liquidity stress.
You see, once again, down to 75 days, it's actually lower than we had in 2022, on the top left side of the slide. Top right, Stage 2 loans. Do we have a lot of credit that's showing a marked deterioration in risk profile? Answer is no. Stable at 9%, right? Coverage ratio in that 9% is 7.6. Rating migration could also be, you know, an indicator, so, of our clients, right? How many are increasing their rating, so improving, how many are decreasing their rating, how many are stable? You can see that there is no serious shift, and actually, in Q4 2023, the increases were numerically more present than the decreases. Leading on the bottom right corner to the probability of default in the portfolio, according to our models, flattish at 3%, right?
So once again, we can report that, you know, notwithstanding the rate scenario, notwithstanding the macro scenario, Italian corporates, at least our client base, appears quite resilient. Now, it could be obviously a reflection of also our selectiveness, but we think it is generally true for the Italian economy today. And then, as we always say, we'll see the next quarters, how it develops. Page 12, funding. So we have, on the left-hand side, the following maturities that are a bit more sizable, right? So we have EUR 1.5 billion TLTRO expiring in September 2024, and we have EUR 0.4 billion senior bonds expiring in June 2024. What have we done to prepare for that in the middle? Well, first of all, we already repaid EUR 0.5 billion TLTRO in December.
We have executed the remarketing of senior leasing securitization notes. We have ramped up a securitization that existed, that was created in 2021, of an unsecured NPL portfolio. Both of these are worth EUR 0.4 billion. We issued a senior bond in September, you may remember. We had, in Q4, EUR 200 million coming in, in Rendimax and German deposits. Another source of funding, we don't need to do anything for that, we just signal it, we keep it there, is that we have EUR 0.6 billion of our proprietary portfolio maturing before September. We expect not to reinvest that, so that's actually funding becoming available.
Leading us to the right of the slide, what are we still doing or what's in the process of being done, right, to keep our liquidity profile as comfortable as you've seen it, right? First of all, we expect to repay another tranche of TLTRO in March, EUR 0.5 billion. We like to do that significantly ahead of the schedule. Regulators approve of it. We are so liquid, that's actually inefficient today. So, no reason not to start repaying and avoid to have a bump, right, when the TLTRO actually matures in September. We've seen and we are executing a further increase of retail funding. We're very pleased with the reactivity of our retail funding instruments.
We had, in the 40 days since the start of the year, an additional EUR 400 million coming in, leading us into a place where we can reevaluate also the rates that we offer. And you know, being so liquid, that means that we can be a bit more a bit less generous, I would say, in the rates that we put out there. We expect to issue senior bonds subject to market conditions. When the time is right, we'll let you know. And finally, we expect to do some repos with the institutional counterparties that we have, using sovereign bonds that are currently posted at the ECB against the TLTRO, right, so they will free up as we pay back tranches.
Available cash projected as after the full TLTRO repayment, we can confidently say we expect it to be north of EUR 1 billion, starting with an available cash position on December 31 of EUR 1.4 billion, to which you might add the retail funding that came in in January. So today, it's really, really at very high levels. Page 13, capital. CET1, from 15.5%-14.87%. That's including the net income and the dividend, right? So we computed it. How did that evolve? We had an 8 basis points increase due to the improvement in OCI reserves. Actually, that, that reads increase, it should say improvement, right? Partially upset by intangible assets and other reserves. And then we had quite some investment in risk-weighted assets, so we put the capital to work.
We consider this actually good news, because it means that we were commercially able to find the nice risks to underwrite. That's worth 74 basis points. Mainly volume growth in factoring. We increased EUR 447 million risk-weighted assets there. Some increase in operational risk and some decrease in market risk, the usual smallish movements. But still 14.87, almost 15, we consider it a comfortable and prudent CET1 ratio. Page 14, outlook. Always a relevant question that, given also the uncertainty that we see in the economy, right? So we put in a slide to address this. We can, of course, comment more in the Q&A. We confirm the guidance for 2024, EUR 160 million.
That's the business plan target, and for now, we leave that unchanged. We expect the macro environment to be a bit more challenging than it was in 2023, so we're planning for that. Some slowdown in the economy, no recession, so very modest growth is our core scenario. Disinflation is in progress. The speed of that will probably determine central bank action. No sign of widespread asset quality deterioration today. Some anecdotal issues in highly leveraged or low-margin corporates or in specific sectors, but, you know, we think that will continue for some time, this picture. Aggregate cost of funding still progressively increasing. Manageable, we think, thanks to the diversification of sources.
And in terms of, you know, commercial dynamic, we expect corporates to remain a bit cautious on CapEx and, and therefore, in their loan demand. But on the other hand, we see banks being a lot more selective on lending than they were. Therefore, there is still some space for pricing discipline, as you've already seen, that we did in 2023. So, all in all, we think margins can be protected. Significant commercial opportunities in all commercial banking sectors, that's just, you know, effectiveness of the distribution. And also, I want to underline effectiveness on the digital platforms. We're having multiple discussions with players interested in our ability to underwrite digitally. We developed these in the last two years, and they are highly effective.
So we expect some contribution to come from there also, which is, in terms of cost income, very, a very efficient way to sell credit. Final point, some capital markets opportunity deriving from book gains in the proprietary portfolio that's already ongoing. In general, we've made some profit there, given the rates and spreads that developed really nicely and led us to make some book profit in January, that's already, you know, in place for 2024. So all in all, we confirm the net income target of EUR 160 million.
I must always add, right, assuming no significant deterioration in the macroeconomic and geopolitical environment, we have to say there's quite some ugly things going on globally, and therefore, you know, we can make these assumptions in the scenario in which we don't have a precipitation of truly ugly geopolitical events. Page 15, where are we in the execution of the plan? It's nice to take stock for a second. So we had an aggregate on the left-hand side, net profit target for two years of EUR 450 million. If we look at the first two years, 301 is now delivered.
If we stay with the guidance for a second, with the obvious qualification and statements that we just made, that would add 160, leading us to have, in the three-year plan, EUR 460 million net profits aggregate, significantly, you know, exceeding the target. On the right-hand side, dividends, where we have two effects. One is the net profit effect, the second is the variable payout ratio that we instituted since this year. We had an aggregate target for three years of EUR 200 million. Actual payouts in May, when we will have paid the remaining part, right, will be EUR 183 million. Therefore, we can today observe that 92% of the aggregate dividends promised in the business plan are already paid out.
If we make the guidance in 2024, that will add a further 110 based on the current policy, leading us to exceed dividend payouts by 45% in the plan if we make the guidance next year. So we consider this definitely a good performance. I won't comment page 16. It contains the details of what we've already illustrated, and I will now leave the floor for any questions that you might have that we will answer gladly. Thank you very much for your attention this far.
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. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Fabrizio Bernardi, Intermonte. Please go ahead.
Hi. Good afternoon, everybody. Thank you for slide 15, it's very self-explanatory. It's very nice to drive the attention of investor. I would have a question on, let's say the macroeconomic slowdown, but no recession that you mentioned on page 14. So I would ask, if where do you see potential macro deterioration, and which sector may create some issues to your clients? Then you have made a very detailed presentation of 2024. You confirmed the budget you have.
So I would like to understand which are the growth drivers in 2024, and maybe if you can drive us to the cost base, try to understand the moving part of the OpEx of Banca Ifis, especially in terms of the labor contract. And maybe if you can also give us a call on the provisions that we may consider in 2024, and if we may assume that any use of the overlays. Thank you.
Okay. So I wrote down your questions. If I missed something or skipped something, then please remind me. So loan loss provisions and macro slowdown. As I mentioned, not even the forward-looking indicators today, right, give us any serious signals, right, of an imminent recession or widespread asset quality deterioration. We would see probably a progressive normalization of cost of risk. Where do we see issues? We see rather than specific sectors, I think until now, it's actually quite idiosyncratic, so it's highly leveraged situations or low-margin corporates operating in sectors where you don't have a lot of growth, right?
So where we see today, the issues actually materializing, it's those specific situations, but they tend to be connected a little bit more to leverage and a little bit less to, you know, whole sectors that are turning bad. Just some flavor on the provisions that we made. I think if we take the top two, you already have 50% of the overall number, right? If you take the top four, you have 60% of the overall number. So it's quite concentrated, and it's very idiosyncratic, until now, and that's also why you see the forward-looking indicators looking so normal, right? So stable. Growth drivers and cost drivers are looking forward. I'll focus on costs for a second.
Yeah, so 2024 operating cost outlook, as I mentioned, right, roughly EUR 100 million per month, roughly, with the usual seasonality. So Q4 2023 is not a normalized base, right? We accelerated some projects and the consequent booking of costs to the benefit of 2024, that's worth roughly EUR 3 million. And there are some stuff that won't come back. There was the one-off of Revalea, right? So we had the integration costs of EUR 11.5 million, partially offset by the bad will. And then there's the new labor contract. So if we look forward to 2024, except HR costs due to this specific element to increase by EUR 6 million, right? Other than that, other operating costs and depreciation, low single digits increase. Okay? I hope this is okay for you.
Overlays. Overlays weren't touched until now. Now, the thing with the overlays is that, at some point, you know, they need to be economically and accounting-wise justified. So we had started to build these overlays when COVID struck, and that's when the first roughly EUR 25 million were set aside. We continued building on it, because right after COVID, as soon as we were recovering, we had the inflation picking up, we had the energy shock, and we had the war in Ukraine, right? Then we had the supply chain disruption with Asia and everything. Actually, every time we planned, we expected the next year to be a little bit more hostile in terms of credit risk than... And potentially subject to macro shocks than the previous one.
So we kept building up these overlays, but you get to a point where in a normal, benign scenario, from an accounting perspective, good bookkeeping requires you to let it flow back to the PNL. Expect us in 2024 to start reducing the overlays. We'll see to what extent, but certainly we won't be adding any, also because, you know, accounting-wise, we don't think we could justify it. And we'll probably benefit from a partial recovery of those overlays that we put aside. Very partial, but expect it to come down. We'll see how much, and also, you know, we need to see a little bit how the year develops. I think I got them all, right, Fabrizio?
Yes. If I can, one top up after Revalea, I would like to understand your appetite for new portfolios, because Revalea is, was fairly, fairly large. So I guess that maybe this acquisition has filled the basket of your appetite, but maybe I'm wrong. So, if you can add any color about this.
Yeah. Fabrizio, you're not wrong at all. Revalea was strategic in the sense that it allowed us to complete the, the acquisition targets for NPLs, a year in advance, roughly, right? The, the portfolio was worth EUR 6.8 billion gross and, roughly EUR 250 million net, right? So, what we're doing on the basis of this is, very selectively purchasing. We're not out of the market, but we have to like the price, and we have to like the composition of the portfolios, because we're not in any way, shape, or form obliged to buy. So expect in 2024 NPLs to still contribute in the order of 40%, roughly, of revenues and net income. If we look at the market, we, we see, bit of a slowdown in transactions.
We had roughly EUR 30 billion in 2023, the overall market, right? Not us. That's probably going to look like EUR 20 billion, roughly, in 2024, with an increase of secondary market up to roughly 50% of that value. So, we will continue to buy, but we'd like to be in a place where we can be quite rigorous in terms of selectivity. So no stop on purchasing, even though, you know, we could do, we could say we're done, right? But selective purchases where we like the portfolios.
Okay, thank you very much. Very clear.
Thank you, Fabrizio.
Next question is from Manuela Meroni, Intesa Sanpaolo. Please go ahead.
Yes, good afternoon. Thank you for taking my questions. The first one is on commercial banking. In the last quarter of the year, the commercial banking loans increased quite significantly by EUR 600 million, while your revenue has been broadly stable. So, wondering if you can elaborate on on trend. This is the reason of higher cost of funding, lower margin, or what else? The second question, group of questions is on the funding. What do you expect in terms of cost of funding for 2024? You mentioned that you are going to issue a bond. I'm wondering if you are going to issue it in 2024. And as regard retail deposits, you increase your retail deposits by EUR 400 million in January.
How do you get this strong result? And there are some kind of concentration in this new funding. Third question is on your bond portfolio. Do you expect to shrink your bond portfolio after the repayment of TLTRO? And are you expecting any impact on your NII or revenues? And the last question is on the outlook. What we should expect in terms of revenue trend for 2024, considering the probably higher cost of funding, the contribution of Revalea, and your capability to grow the loan book and to repricing assets? Thank you.
Yeah, thanks, Manuela. Very clear. So commercial banking, loan growth, you're right. We had an increase of roughly EUR 0.6 billion. And by the way, the revenue impact of this in the quarter was not so relevant, so what's going on? It's just timing. It came in really towards the end of the year, so it didn't really fully contribute yet. Expect this to be... There's always seasonality there, right? Both in terms of leasing and underwriting and in terms of factoring. So, expect this to contribute with some persistence, right, in Q1, but it wasn't really contributing a lot in Q4. Was there any particular, you know, price effect? Not really.
If you look at leasing spreads, right, we're actually up 30 basis points year-on-year, and I underline on top of the base rate, because if you take this from a client perspective, he sees both increases. The client doesn't pay the spread, he pays the spread and the base rate, right? And so that's definitely even improving. In factoring, stable, so roughly 3% spread with an additional roughly 3% commissions, on the basis that these portfolios turn 4 times per year, right? So these commissions really add up. If you add the base rates, that means that the overall cost for the SME client of the factoring is in the order of 10%, right? So you can see that it's very healthy business.
It requires a lot of distribution costs, because it's a very technical product. Requires a lot of assistance, it requires aftersales. We digitalize that as we can, but it's quite a rich product. So yes, you saw the increase in risk-weighted assets. No, there was no, you know, significant pricing effect, certainly no downward effect on the prices. And the impact is not so relevant in the year because it came really towards the end, and also in the quarter, and we're seeing it's quite persistent. So for now, we're still benefiting from these volumes. Cost of funding. What do you expect in terms of cost of funding? Well, the thing is that it depends on the rate scenario, right? So in November, we had an estimate of roughly 3.6.
With the current forward curves, it's, it's maybe more looking like 3.5%. We'd expect it to decrease on the marginal side, right, in the first half of the year, and the stabilization afterwards. Further increase, right, in the first half of the year with the stabilization afterwards, right? On your question of the bonds, will we do that in 2024? Most definitely, yes. I expect first half of the year, actually. So, that's, you know, once again, depending on market situation, we don't want to be too specific, but that's, that's gonna happen, definitely within the year, and I would say within the first half of the year.
I'm just gonna touch on retail funding for a second, and then I'm gonna give the word to the CFO on the proprietary portfolio. So retail funding, what do we do? We once again, this is preparation for the repayments, right? So it's making a bit of warehouse before we anticipate the repayment of the TLTRO. Was there any concentration? Yes, we had concentration in terms of duration, so we pushed a bit more on the 2 years, which we think is a good balance between offering an attractive rate and having some persistency. But on the other hand, not locking in the very high rates that exist today for 4 or 5 years, like we used to do, right, when the rates were very low.
So a bit of concentration in terms of duration, but not in terms of individual customers. So the average ticket size is very fragmented. We don't do large corporate deposits to a significant extent. We those EUR 400 million that we mentioned, this ticket size of the stuff is between EUR 20,000 and EUR 30,000. So very fragmented, and therefore also covered by the insurance scheme, which is nice for the client. Very fragmented retail funding. I'm gonna hand over to Roberto Ferrari for your question on the NPL portfolio. Before that, let me just, I meant to say this, we opened 6,000 accounts in roughly one month, right?
So I really want to thank our operations team, which is, who are very efficient and made very long days. They were able to open 6,000 accounts in a month, right? So, thank you to the colleagues. Roberto, to you.
Thank you very much. On the financial portfolio, we are planning to lower the total amount, from EUR 3.1 billion to something around EUR 2.5 billion, with higher duration. We are lengthening the duration of the portfolio, and, we do expect in 2024, an average yield, north of 3.5%, so something between 3.5% and 3.7%, is the yield that we do expect from the financial portfolio. Thank you very much for asking.
You had a question, Manuela. Martino Da Rio is telling me that I missed one. You had a question on revenues outlook. So I'll answer in a slightly simplified way. We expect low single digit increase in revenues. So we want to make an increase, but it's going to be single digits. And probably the same in operating costs, given what we saw on the labor contract and some effect of inflation. Even though I would say, thanks to our purchasing team, we are really countering the inflation impact very well. Had we not executed this continuous demand management and price renegotiation, then we would have seen a much uglier impact of inflation on our cost base.
Unit costs in many areas are actually going down, not up, regardless of the, of the inflation scenario. So, single digit increase in revenues and, and low single digit increase in operating costs. Where does this come from? Well, Revalea, of course, contributes for 12 months rather than just for 2, so that's adding. Volume growth also. We see the opportunity to, also given, you know, commercial effectiveness, we see the opportunity to grow in volumes, as we've shown, right, at the end of last year. There's a lot of commercial effectiveness that's ready to be made available.
So, those are the drivers that will allow us, even with the cost of funding evolution, to present this fairly benign scenario that we are sharing with you today.
Thank you very much. Very clear. The next question is from Simonetta Chiriotti, Mediobanca. Please go ahead.
Hello. Hi, thank you for taking my question. I have got two. The first is on the Q4 numbers. So looking at factoring, you explained that also in factoring, as in commercial banking, some assets were collected at the end of the period, so did not contribute. But I see a reduction in absolute terms of the revenues of the factoring segment in the last quarter of the year, if I compare to the last quarter of 2022. So I would like to understand the reason of this trend, which is visible also in leasing to a lower extent. And the second question is more general.
We read a lot of possible regulatory changes in factoring, the late payment directive, in the NPL business. Well, it declines the noise, but we have heard for some time of measures to support the debtors. So I would like to have a comment from you on these possible regulatory risks in your sectors. Thank you.
Thank you, Simonetta. So on factoring, generally on commercial banking, I think what you're seeing is the impact mostly of cost of funding in terms of increase, then 2022 was still quite a different picture than 2023. So we definitely feel it. When we present divisional numbers, keep in mind that we use internal transfer rates, so there's a little bit also of let me say, choice there, right? In how much we charge the businesses for the funding. And the way to make sure that they increase the prices is to make sure we charge them fully. Then on aggregate, the bank may actually not have, you know, this type of effect, but divisionally, you will see it.
Second thing that I want to signal in terms of factoring is that the bank decided last year to progressively execute the business of advancing payments vis-à-vis the Italian public health system. That was a roughly EUR 500 million portfolio that should have been classified into past due almost fully, given the new rules for the definition of default, after some conversations with the regulator, we decided that that was an unsustainable business model in the current environment. So progressively, we exited the pharma business that was booked as factoring. It didn't turn over as much, so you wouldn't see such a strong impact on the turnover because these counterparties actually pay very late, so it's very lengthy. But you do see a decrease, obviously, in the revenues in the book.
So these effects, I think, contribute to what you saw. In terms of regulatory risk, I'm not ashamed to say that, you know, there could be pluses and minuses coming out of that. I'm a bit hesitant to make a prediction on how it will impact. We're looking at it. We're not today overly concerned, but I'm keeping the comments to a minimum until the picture is a bit clearer on what it will mean commercially, because it could work in different ways. Okay?
Okay. Thank you.
The next question is from Andrea Lisi, Equita. Please go ahead.
Hi, thank you for taking my question. Sorry, but I hear you very well, but a question on your guidance you provided for next year. Just to understand, where do you think you were more prudent and instead, which are the elements most at risk? Because looking at the numbers and what you said, I think my perception is that you are really cautious on the guidance in the sense that making some numbers, I end up more close to 170 than 160. Maybe I am wrong with the math, but just to understand where you took the most margins of prudence there, and so just a comment on that. Thank you.
Yeah, thanks, Andrea. But first of all, I really appreciate the question, and I take it as a compliment, okay? So, and may the Lord hear you, okay? So, we'd be very happy to be perceived as cautious, right, in a few months from now. Actually, I wouldn't qualify today as overly cautious. There are a couple things that are quite impactful and that we don't want to underestimate. The first thing is cost of funding increase. Now, it's that is not immediately dependent on the rates at the marginal side. It's also a function of cheap funding from the past expiring and more expensive funding from the present coming in.
So the dynamic is a little bit more ugly, Andrea, than it might look if you only look at the rates on the marginal side. So there's that effect, first of all. Secondly, if we look at the rates, the rates have the characteristic that on the asset side, your book reacts immediately. So if the Euribor goes down by, just pick a number, 50 basis points, right? Your gross interest revenues of the commercial banking book, which is 85% Euribor sensitive, will immediately perform less. On the liability side, that's not as quick, because if you look at the assets on the liability, or if you look at the size, right, of the buckets on the liability side, there are quite some elements there which are not sensitive to the rate to the same extent. Obviously, a floater would be, right?
But if you look at Rendimax, it's not, right? So when your Euribor goes down, you don't have a benefit on part of your liabilities. So you have this effect, where you both have the persistency of, of the rate thing, of the, of the cost of funding increase, due to simple expiry of the old ones, and the effect of a rate scenario, which on the marginal side, doesn't really help. First element. Second element, cost of risk. You would expect normally in a, in an economy that doesn't grow, expectations are what? 0.4%, no, down in that neighborhood, you would expect a certain riskiness. If you look at the indicators that we see until now, right, everything seems to be, everything seems to be quite fine, right?
Companies appear liquid. There is no radical increase in stage 2, as we saw. But our risk models tell us that in a scenario like this, and that's the historic experience, except for the last two years, right? Post-COVID, we had this very low cost of risk because everybody was so liquid. But if you take longer term trends, our risk models tell us that in a scenario like this, cost of risk will increase. So on the basis of these two elements, mostly, we would rather not overextend our optimism, right? And promise more today at the early February than what the business plan states. Executing the business plan will actually be, you know, it has some execution risk, actually, I would say.
So, we're really pleased to hear that you would assume that we give numbers that, you know, don't that are not overly optimistic, and that's the way we've tried to communicate with the market in the last 10 quarters, and I really hope you're right, and we'll see towards the half of the year, which is when we usually reexamine guidance, right? If you look at the increase in the guidance that we made in the last two years, we did it on the first half numbers, right? So I expect a few months down the line to be able to comment more on, more in detail on what actually happened, but for now, I would say EUR 160, and my sense is that on the basis of these things that I described, it's the central scenario.
It is not a very prudent position.
Super. Thank you.
The next question is from Giuseppe Grimaldi, BNP Paribas. Please go ahead.
Good afternoon, everybody, and thanks for your presentation, very clear. I have actually two questions. The first one is related to Revalea. What's the contribution that you expect in terms of revenue, cost, and net income for the year? The second question relates to your loan book. You discussed before that demand is somehow slowing, so what's the view you have in terms of loan book? Do you expect still growth to kick in in 2024, or a more stable loan book? Just to give us a bit of color on that, it will be very helpful. Thanks a lot.
Thank you. Yeah, very clear. So Revalea, I'll just give you some numbers, okay? We, we commented a lot already. So let me first of all say that, you know, the, the, we're very pleased with this acquisition. And we're also pleased to have had the space in 2023 to upfront the cost, because it's actually quite rare that when you, you... When you make an acquisition like that, to have immediately in the first years after, right, a positive contribution on your earnings. And what we expect in terms of pre-tax, roughly in the first year, is to see order of magnitude, EUR 20 million pre-tax profit coming out of that, right? Revenues, order of magnitude EUR 35 million, costs, order of magnitude EUR 15 million, right? Something like that. EUR 35 million-EUR 40 million revenues, EUR 15 million-EUR 20 million costs, something like that.
And that's nice being year one, right? Because it was booked as part of the group in November first, so that's quite quick. Loan book, yeah, so slowing demand, but you know, a bit of commercial confidence in our ability to grow market share, and that also, I should say, on the basis of the behavior of the commercial banks, whom we've seen to become quite more prudent in loan offerings, right? So and that is a scenario in which a player like us can, you know, make the difference. We're specialists, so you know, we have our own distribution capability, and we have all the digital platforms, right?
So we think that, that we can, even in a, in a, in a scenario in which we won't see a lot of loan growth, actually, we see loan contraction, right? In the country, that's already ongoing, given that a lot of the COVID loans are being repaid and not, substituted. Okay, we expect in an environment like this to grow the loan book a bit. Now, we, we had imagined, to add ballpark figures between EUR 0.5 billion and EUR 0.8 billion, roughly, of commercial banking loans in 2024, except that Q4 went better than we thought. So our targets would, would be a little bit lower than the number I just gave you, not because the ambition wasn't there, but because Q4 started or went better than we thought. So the starting point is actually, is actually encouraging. Okay?
Thanks a lot.
Did I answer your question, Giuseppe?
Yes. Yes, definitely, yes.
Okay. Thank you, Giuseppe.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Once again, if you wish to ask a question, please press star and one on your telephone. Mr. Geertman, there are no more questions registered at this time.
So thank you very much for your attendance. I know these are very long days. I fear we're not the last call, so you may want to disconnect now and maybe even listen to someone else. And once again, we really appreciate your time and attention, and we see you in next quarter, hopefully proving Andrea Lisi right, that we were prudent. I wish you all a good afternoon.
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