Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca Ifis first-half 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, to reach an operator by pressing star and zero on the telephone. At this time, I would like to turn the conference over to Frederik Geertman, CEO of Banca Ifis. Please go ahead.
Thank you, Madam, and good afternoon, everybody. Welcome to our third quarter 2023 results call. I'm joined this afternoon by, as usual, our Investor Relations executive, Martino Da Rio, and by our brand-new CFO, Roberto Ferrari, whom we welcome to the bank and to this call, and you might hear him a little bit later on. I'll go straight to the presentation, page four, where we have the Executive Summary. So we have net income in third quarter of 2023 of EUR 34 million. Over nine months, we post EUR 125 million net income. That's + 18% year-on-year. Loan loss provisions are at EUR 15 million.
That includes EUR 6 million on a structured finance position, that's gone to UTP, and we have stable management overlays at EUR 65 million, present in the bank, untouched until now. The boards today deliberated to allocate the windfall tax to non-distributable reserves, so there is no consideration due. We are following the path that most banks in Italy are following, and we post a quarter- one ratio at 15.5%. That's calculated, including the net income year-to-date, net of the interim dividend and net of the foreseeable dividend that we will pay in May. We have also deliberated in the Board today EUR 1.2 per share interim dividends to be paid on November 22nd. The ex-dividend date is November 23rd, and the record date is November 21st. So let's go into the buildup of these numbers.
Page five, net revenues. We have net revenues at EUR 164 million. That's as you would expect in Q3, slightly lower than Q2, -5%, due to the typical August seasonality. If we look at the breakdown of the numbers in Q3, commercial banking revenue is EUR 84 million. Excluding capital gains on equity and private equity investments that are, you know, a bit lumpy, right? The revenues would be stable Q- on- Q, and would be up 7% year-on-year, because in the previous quarters, we had a bit of contribution from those elements. NPL revenues, very resilient, EUR 66 million in Q3, despite the inflation and the rate scenario. Non-core and GNS at EUR 14 million, confirming a recurrent and stable contribution to revenues. First nine months, revenues year-on-year, +5%.
Commercial activity, page six, reflects the market and a bit of typical Q3 seasonality, right? So factoring turnover, the market did -4%, we did +2%. Excluding the pharma portfolios, we always do, you remember that. We see some signs of macro slowdown, slightly lower invoices, slightly lower credit demand. We grow above market, and we're compensating those trends commercially. On the leasing side, new leasing equipment and technology, that's the underwriting market, is -14%. We post +3% year-on-year in the quarter. Since August, we saw some evidence of delays in CapEx decisions of SMEs. We are expecting in Q4, maybe a little bit of assistance from the Sabatini Law, the law that gives some tax incentives to CapEx.
So we might have some leasing acceleration in Q4 dedicated to that. But as you see, we underwrite a little bit better than the market in equipment and technology. In automotive, the opposite is true. We have, in terms of underwriting, slightly less than a year ago. Market is still growing. Two reasons for that: one is a focus on premium luxury segments and not volumes, in combination with very rigorous price and margin discipline. Keep in mind when we say this, that in Q3 2023, the average spread was 3.92%, and that's 30 basis points up year-on-year.
So if you take a base rate increase of roughly 400 basis points on top of that, you see that, you know, this is quite an increase in price, in end price, and we are maintaining that policy, as we said, because we want to protect margin rather than volumes. Page seven, NPL. Very good quarterly collections, considering it's Q3, right? So we have, once again, EUR 100 million cash collection, 52% extrajudicial, 48% judicial. We look at revenues, Q-on-Q, slightly up versus Q2, and up EUR 3 million versus last year. So very resilient NPL portfolio. What we need to keep in mind there is, first of all, that on the extrajudicial side, so the voluntary plans... we have seen some initial slowdown.
We're expecting that to remain a little bit softer than the judicial side, and we're planning for that. And another thing to keep in mind is that we have, for very modest profits, but still some profits, we sold, you know, some gross book value of sales of portfolio for, I would say, housekeeping purposes. But the value integration costs will be booked upfront in the fourth quarter. Going to costs, page H, page eight, sorry. Third quarter, 2023, EUR 93 million. That's very nice performance of the EUR 31 million that's exposed to inflation. So what's happening is that the bank is able, in terms of managing both its consumption and the prices, to offset inflation effects by contract renegotiation and demand management.
We keep investing in IT, and in the positioning of the bank, in branding, in advertising. So we have EUR 23 million IT expenses year-to-date, right? And that's just the execution of the plan. Then we have EUR -7 million Q-on-Q, linked to NPL recovery, typical of the courts being shut down in August, so that's legal fees going down a bit. Finally, stable cost of personnel. Next year, that's expected to increase due to the renewal of the labor contract at the national level. It's quite well known. The rest of the difference between 105 and 93 is connected to the FITD and SRF costs. I would take you to page nine, asset quality. So we have provisions of EUR 50 million.
We've stopped adding to the overlay, so that's stable at EUR 65 million. We have here some more normal, I would say, cost of risk that you would expect from a bank like us. At EUR 50 million, we have one pretty large file, where we took EUR 6 million, which was classified as UTP. As mentioned, the asset quality is protected by 1.2% of ex-ante exposures management overlay. It's one of the highest that we see in the system. In fact, it's a multiple of what we see in other institutions, this level of overlay. NPE ratios, gross 6.1%, net 3.9%. If we take out the past due of the final portfolio, well-known issue, it's 4.6% and 2.5% respectively, not a lot to add there.
We always get questions on macro, so on page 10, we thought we would maybe share with you some data that can help us reflect on credit risk in the country. We—in this quarter, too, we don't really see signs of macro credit risks materializing in our book. If you look at the payment days in factoring, you can see that we are actually below 2022 levels, so companies appear to be quite liquid. If you take a look at Stage 1 and Stage 2 loans, right, the mix, the Stage 2 is still at 8%, so we don't have a significant deterioration there. If we look bottom left at the rating migrations, we see a very physiological mobility, so no rating deterioration within the clients.
And if we look at the bottom right, the probability of default, it's really flattish, so no mixed deterioration in the book. So all in all, it appears that even though, you know, we are witnessing a slowdown of growth, we're witnessing some contraction of industrial production in Germany, which is a key market for Italy, and as you can imagine, our SMEs are exposed to it. Even though we see these things, right, we read them in the macro statistics, there is no materialization yet of risk inside the bank's book. Page 11, funding. The plan that we have together to reimburse the TLTRO, which expires in September 2024, is being executed. We're slightly ahead of schedule. Remind you, we have EUR 2 billion TLTRO expiring, and we have a senior bond expiring in June.
Here you see, page 11, in the middle, the management actions that have been carried out. So, remarketing of securitization notes of leasing books of a leasing book, ramp up of the NPL unsecured portfolio of EUR 400 million. Senior bond issue, we executed in September 2023. We took a window, and we're quite happy that we took it, considering how the market developed afterwards. And finally, we remind you that we have EUR 700 million bonds maturing, mostly govies, that we don't expect to reinvest.
So, if you add the ongoing management actions, right, that we will still do in the coming months, right, and if you add that we have potentially EUR 1 billion potential repos with institutional counterparties, which is currently being posted at the ECB against the TLTRO, you see that we have an encouraging situation in terms of the TLTRO repayment. The available cash after the TLTRO repayment is projected north of EUR 1 billion. Today, the available cash is EUR 1.7 billion. That's an extremely liquid situation for a bank. Slightly inefficient, obviously, but necessary given the profile of next year and the repayment of the TLTRO. So this was according to plan. Page 12, capital ratios evolution. We add 50 basis points, 52 basis points to the capital.
So there you see the ability of the bank to generate profits. And this is consistent with the new dividend policy. So what's not included here is the interim dividends that we deliberated to pay today in the Board. And what's also not added is the piece of foreseeable dividend that we expect to pay in May on the basis of the profits that we already made, right? Because as you can imagine, with a EUR 124 million net profit, with the new policy, we would have paid out more than the amount than the EUR 63 million interim dividend, if we had applied it already. So we have a payout ratio in Q3 of 50%, 50.5%, but we're not computing the remaining piece into the CET1 ratio. 13 and 14, couple of considerations to round up.
What's the bank doing? Well, the bank is executing its business plan, growing the core business, providing attractive dividends, right? You see the net income evolution of our bank from 2019, pre-COVID, EUR 76 million core and EUR 47 million PPA. We posted EUR 133 million in 2022, with a little bit of PPA, EUR 8 million. We reiterate our guidance of EUR 160 million this year, of which only EUR 8 million are PPA. So you can see the progression in terms of recurring industrial profits being generated, marginal reliance on extraordinary revenues, maintaining CapEx and OpEx investments to ensure operational excellence. We are a challenger bank. We need to be very good at what we do. If not, we would not be able to, you know, outrun the market.
So we keep doing that, and that's both investments in tech and investments in the positioning of the bank. We reiterate the guidance, as we said, at EUR 160 million, which would mean that we delivered, just like last year, the 2024 target the year in advance. New dividend policy, if this would happen, right? So in case of confirmation of the guidance, which of course still needs to be executed, we would pay EUR 110 million, which would be in aggregate, more than EUR 2 per share, EUR 63 million in interim dividends paid on November 2022. And we've computed, you know, a potential dividend yield if the guidance would be met, and if we took the price as a reference of November 3rd, it is, yeah.
But you can work out the numbers based on the latest data. We have a dividend yield that's in excess of 12.5%, so by all means, relevant dividend yield. Page 14, bit of qualitative outlook, and I'm sure you will ask what's the macro scenario in Italy? So we have a GDP slowdown, right, in the presence of high interest rates and gradually reducing inflation. We expect corporates to be a bit more cautious on CapEx and loan demand. We're already seeing it. I mean, credit in the country is contracting, admittedly after a very, very significant credit distribution phase of all the banks. Lots of companies taking money just to be safe, given that it was so cheap and freely available. So credit is contracting.
We expect, and we're planning for increased cost of funding. That's true in all channels: retail, institutional, bonds. No sign, as you saw, of widespread asset quality deterioration. First anecdotal issues appearing, right? First conversations of, you know, SMEs, maybe looking to reschedule some debt. Sporadic, but, you know, first elements appearing. So on the risk side, still an extremely benign scenario. I would say probably because we still have a lot of liquidity in the market and in the companies. How's the bank reacting in this scenario? Well, first of all, it's trivial, obviously, but it's focused on running the core business well, maintaining its investments in its own transformation. Continue the emphasis on short-term lending with attractive risk-return ratios, so keeping the balance sheets short. I cannot stress this enough.
I'd like the market to appreciate the fact that, commercially, it would have been entirely possible to lend very significant amount in terms of long-term lending with government guarantees, five to seven years duration, locking of spreads, locking of rates, assumption of a refinancing risk. The bank did not do that. Our long-term lending approach has remained selective in terms of risk, demanding in terms of price. The combination of that leads to long-term lending with government guarantees. That is not even EUR 1 billion, I think about EUR 700 million. And that is the philosophy of the bank. So we focus on factoring, we focus on short-term leasing. We don't do nautical leasing. We don't do real estate leasing. We don't do the longer stuff.
We like to remain nimble, also in terms of balance sheet structure, and that has consequences for our liquidity, obviously, and for our risk profile. I can't stress that enough. We completed the funding requirements of the TLTRO repayment, in the sense that we're ahead of our plan, so we still need to execute a couple of things, but compared to where we are now, it's ahead of the plan that we had. For instance, the senior bond, we would have issued it in Q4, I believe, according to the original plan. We did it in Q3 as soon as we saw the window. Management overlay is still there, and CET1 increasing. So that's the way we approach this slightly, you know, more uncertain market situation, that is ahead of us, with a lot of confidence.
This ends the formal part of the presentation, so I would stop here, and I would gladly take your questions together with Martino Da Rio and with Roberto Ferrari, who are here with me. Thank you.
Excuse me. 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 touch tone 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 Manuela Meroni of Intesa Sanpaolo. Please go ahead.
Yes. Hello, everybody. Thank you for taking my questions. I have four questions. The first one is on the asset quality. The overall asset quality of your loan book has been stable in this quarter. I'm wondering if you are seeing some sign of the deterioration of the asset quality in some specific segments or accounts, and what do you expect in terms of cost of risk in the fourth quarter of 2023 and in 2024? The second question is on the cost of funding. The cost of funding has increased quite significantly during 2023. Is this increase in line with your estimates and your guidance, and how much do you expect in terms of cost of funding in the fourth quarter of this year and in 2024?
And finally, could you please give us also the cost of deposits? So I guess that the 3.1% that you gave us for 2Q of 2023 is the overall cost of funding. So I'm wondering if you can just provide us with the cost of deposits. The third question is on the TLTRO. Thanks to you, thanks for providing us with your funding plan for the reimbursement of the TLTRO. It's clear that you have several ways to fund this repayment between bond issues, deposits, repos, and maturing of government bonds.
So could you please elaborate a little bit on the split between the different sources of funding for the repayment of TLTRO, and if you plan to issue senior bonds in 2024? And finally, I'm wondering if you could consider to reimburse the TLTRO in advance compared the September 2024 maturity. The last question is on the NPL business. I saw no acquisition in the third quarter. It's clear that with the purchase of Revalea, you already achieved your NPL acquisition targets. But I'm wondering, let's say, what are you seeing on the market? Just you do not have any appetite for NPL acquisitions, or there is no market, or you think that the market is too risky right now in the current environment? Thank you.
Okay. Manuela, I'm not sure I got all your questions fully, but I think I got most, so I will sort of start answering, and if I miss something, then please integrate, okay?
Sure.
So you started with a question on asset quality, right? And what we expect. So we don't see, and it's quite hard to predict a deterioration in terms of probability of default and new flows to default. So we're not seeing it, and it's kind of difficult to predict, okay? What I would say is, for Q4, expect something similar to Q3, right? Maybe slightly less, right? But something similar to Q3. Next year, it will really depend on two factors. One being the macro situation and how it develops, the other being what we do with the overlays. Because as you know, the overlays can't remain there indefinitely.
The overlays, they have a reason to be there, and the reason is that we were preparing for shocks after, you know, Ukraine, supply chain, inflation shock... energy shock, right? As these shocks, at some point, do not materialize, right, then at some point, you have to ask yourself what the justification for the overlay is. So there we have an element that will contribute—2024 will contribute in a positive way, obviously, if we, if we're gonna touch it. So I'll stay away from making specific forecasts on 2024. We haven't done the budget yet, and we've not—we'd prefer not to be so specific because it's, it's also, you know, really difficult.
But what I would say about Q4 is expect something similar to Q3, and in 2024, we don't expect a horrible scenario at all. But, we would expect, due to the slowdown, a normalization of cost of risk. We have been saying this for quarters. We have been saying this, I think, for a year now, and every quarter, we keep finding, happily, that the problems aren't materializing yet. But that's not a prediction. It's just a statement that until now, we seem to be in this place where we don't, we don't have, you know, neither in Ifis nor in other banks in Italy, you know, the real credit risk issues appearing. Cost of funding, is it in line with expectations?
I will say a few things, and then I will let our new CFO make a comment. So, also as a way to make you hear him in his new role. If you ask me, in line with the expectations at the start of the year, I would say no, worse, worse than that. Because at the start of the year, we were expecting that the aggregate interest costs, right, interest rate expenses to increase by, I think it was 2.5%, 2.7%, roughly. What's happening is that they're increasing by more than threefold, right? If you ask me, is it in line with the expectations we had last quarter?
Yes, because, you know, we, as the year, you know, went on, we matured a view, obviously, on the conditions, and so we feel in control of it. But I think it's the increase has been faster than we had imagined a year ago, for sure. I'm gonna let Roberto integrate this qualitative statement.
Hi. Good afternoon, Manuela. Yeah, in terms of cost of funding, we do expect the last quarter of 2023 to be in the area of 3.3%. In our planning of 2024, we do expect our average cost of funding to be close to 3.6%. On Rendimax, where we have a cost that is close to 2%, 2% area. On short-term deposits that are 25% of the total amount, we are still around 1%, so actually the cost is still much lower than the ECB rate. What is our strategy in terms of the TLTRO repayment? It is important to say that we already have EUR 1.7 billion unencumbered capacity.
Post TLTRO, unencumbered capacity will be higher than EUR 2 billion, so we have plenty of room also to define the strategy. We are working to increase retail and corporate deposit. Clearly, we are competing with big banks, where the cost of funding is still very low, so we are trying to attract, to actually increase this source of funding. And also we are planning to issue a senior bond the next year, clearly subject to market conditions, but actually we are very, very flexible to actually exploit window of opportunities. Thank you.
I'll go to your third question, Manuela, TLTRO. So you're asking a bit of details on the bonds maturing and the repayment strategy, if I heard you correctly. So yes, I confirm we have about EUR 700 million proprietary portfolio maturing by September 2024. We don't expect to reinvest that, right? Gonna contribute to the TLTRO repayment. We expect to further increase the retail funding. Yes, that's ongoing, right? Slow level of build up. Slowly but surely, EUR 200 million is probably gonna come in there. We wanna go with a reasonable pace because we don't want to be the price leader in terms of retail funding. It would be unwise for us, given our size. Would we...
Roberto already mentioned to you that yes, if the market conditions are right, we might issue a senior bond, but we don't really have to, strictly. But definitely we like to be an issuer, so we will keep exploring that. Would we repay the TLTRO in advance? We might repay some in advance. Don't expect the bulk of it to go in advance. We might repay some of it in advance. It's tactical. It's really tactical. Let me give you, you know, an additional sort of just thought. Part of the carry of the govies today is negative. So part of the stuff that expires was yielding rates that are below the 4% that we would get the ECB, right?
So you can see that having EUR 1.7 billion of cash now, additional govies maturing, at some point it might become economically beneficial to repay a bit of TLTRO in advance and use one of the earlier windows. But do not expect most of it to happen before the transaction, before the September 2024 deadline. NPL business, you asked about, you know, our appetite and what the market looks like. So we see a market. We have a report, as you probably know. It's called the NPL Watch. We give a lot of insight there in how we see the market.
So we expect the market to decrease a little bit from EUR 30 billion to EUR 20 billion, roughly, of transactions per year on aggregate, with an increase of the secondary market, a decrease of the primary market. Obviously, given that, you know, most banks have significantly delevered already, so those stocks have been fundamentally transferred to a large extent, right? Secondary market is actually quite attractive for us because prices are very good there, so, that's not in itself a bad thing. Secondary market is driven by, for instance, GACS-backed portfolios that underperform. As many today are underperforming, so they will have to do something to, support their business plan. Sales by players who historically are buyers, including us, by the way, right? You see that we sell tails of portfolios, right? So slightly more, slightly more of a mosaic in the market.
You asked about Revalea. I believe that I heard you ask about Revalea. So Revalea, we did the closing on October 31st. Revalea is gonna contribute in 2023, roughly EUR 6 million revenues, roughly same amount of costs, and we're gonna book some integration costs up front to the tune of roughly EUR 10 million. So as we like to upfront costs and have benefits, you know, that appear later, expect us in Q4 to have a net EUR -10 million impact, and that's reflected in the guidance. I think I answered your questions. If I didn't, then please integrate.
No, actually. Yes, you answered my questions. Thank you very much.
The next question is from Irene Rossetto of KBW. Please, go ahead.
Yes, hello to everyone. Two questions also from my side. The first is, you confirmed the guidance of EUR 160 million for 2023, with a decreasing profitability trend, EUR 90 million in H1 and EUR 70 million in H2. Can we consider EUR 160 million as a peak earnings for the cycle? Do you confirm 2024 net income target of EUR 160 million? The second is on cost and revenues, that are substantially flat, year-on-year, both in commercial banking and NPL. What is the reason of this trend? Then what is your expected evolution of operating costs in 2024? And finally, do you see a slowdown in loan demand, and if yes, in which segment? Thank you.
Thank you, Irene. Yes, guidance EUR 160 million, profitability trend also given the Revalea impact, which in Q4 is negative. So a decreasing trend in terms of first half and second half, I confirm. So for next year, we are, we're not touching the net income target of 2024 yet. As you know, the year three of the business plan had EUR 160 million as a target. It's premature to revise it, in our opinion. We are currently working out the numbers, and there are actually a lot of moving parts on this. Let me say a few things that will add positively and a few things that will contribute negatively, right?
You will see that, you know, it's really a bit early to, you know, to touch the guidance for 2024, which is year thee of the business plan. So for now, I would say quite clearly that the target remains at EUR 160 million. What are the upside risks? Well, Revalea is gonna contribute, right? We have the negative carry of the part of the portfolio that's maturing, of the proprietary portfolio that's maturing, that's gonna contribute. We have efficiency gains from all the investments that we made in digitalization and efficiency and effectiveness, I would say. So I expect some commercial impact on a number of projects that can be felt. We have the overlays.
So, you know, all those are things that we're gonna, that are gonna help us in a scenario in which cost of funding might still increase a little bit, right? Nothing as dramatic as this year, remotely, right? Obviously. Maybe a bit of asset quality cost, right, due to the slowdown. The impact of the new labor contract on personnel costs, that's a negative, right? So you see, it's, you know, it's a balancing act. We haven't done the math fully, and we, and therefore, we, I can't communicate a lot more. So I would just reiterate that for now, the year three business plan target stands, right? And we will get back to it in the beginning of 2024.
Revenues being flat-ish year-on-year. Well, you see, what happens is you have an increase in the rate scenario that in the first quarters mostly impacts the asset side, and then more slowly impacts the liability side, right? So what we're seeing now is the gradual increase in cost of funding as we've had the positive impact of rates pickup, which preceded that, right? In the NPL market, mature but still very profitable. Lower formation of NPL, so focus on efficiency, but that's, you know, probably for specialists like us, that's not bad, right? So what would I expect in terms of, you know, revenue development?
The growth that the bank showed in the years 2022 and the first half of 2023, that's that you can expect to slow down significantly. So yes, expect a much flatter trend in terms of revenues. And of course, you know, commercially, we will do, given that we have capital and that we have liquidity, we will do obviously the management actions that can help to keep the revenues as healthy as possible. Cost evolution, well, we have first of all, the contract negotiation going on, right? That's very likely going to yield an increase of personnel costs. We are quite successful at offsetting the inflation, as you saw.
We have quite a lot of variable costs that are part of our, you know, transition strategy with our transformation strategy, and we expect to be able to continue financing this type of investment in the core business, right? So evolution of operating costs, I would say, flat to modest increase, right, given the external factors that are in play. Do we see a slowdown in loan demand? Well, it's there. You can see it in the national statistics. Credit in Italy is contracting across most sectors, right? We see that, you know, the factoring turnover is holding up very nicely, but the companies are actually paying quite early.
So in terms of our loan stock, is not growing as much as the turnover would suggest. We don't expect a huge CapEx boost supporting leasing. We might have in Q4 a little bit of acceleration due to the tax incentives, but nothing structural. So, slowdown in loan demand, yes, but keep in mind, this is a challenger bank, so we always have the market share and the tactical reaction to a situation. We're not a bank that has such a large market share in the country that you somehow reflect the economy, thankfully, right? So, yes, slowdown in loan demand, is it necessarily something that will reflect itself in the size of our balance sheet? I don't think so, right? We can react, thankfully.
It's one of the advantages of being a challenger. I think I had them all with this Irene, you confirm?
Yes, thank you very much.
Next question is from Simonetta Chiriotti of Mediobanca. Please go ahead.
Hi, good afternoon, everybody. A few questions on the NPL segment. The first is on the contribution of Revalea in 2024. So if you could give us an indication of the growth that could come from the integration of this quite sizable portfolio. Second is on you mentioned that extrajudicial settlements are well slowing down. Do you expect this slowdown to be even stronger in 2024? And finally, on the proposals that we see from time to time read on the newspapers to, like, change legislative proposal on NPL that we have seen very different things.
It has been denied by some representatives of the government, but it was on the paper also today, in a different form. So I would like to have your view on this issue. Thank you.
Okay, thank you. So, if I read you correctly or hear you correctly, the first question was, Revalea in Q4, yeah?
In 2024, 2024 next year.
In 2024.
Yeah.
Okay. So, I think, you know, what it will contribute to the P&L is, accounting-wise, as we integrate and merge it, as we put the loans on our book and on our models, and as we maybe look at some pieces of the portfolio that we may discard, sell on, et cetera, et cetera, I would not want to make a prediction of the exact contribution of the Revalea acquisition in 2024.
What I would say is, just because, you know, we think there's value there, that you should probably take into account anywhere between EUR 5 million and EUR 10 million pre-tax profit of contribution in one way or another. Okay? Out of a mix of things that are gonna happen, because accounting-wise, as we do that integration, there are gonna be a lot of moving parts. There's going to be CapEx for the integration, there's going to be the portfolio put in on our models. There are going to be maybe some follow-up transaction. There's going to be... So, you know, it's, I would keep a broad indication in 2024 of a positive initial contribution, right? Of what we think, in any case, is in the medium to long term, a very good transaction for our bank, right?
We will be much more precise at the end of 2024, once we have the portfolio on our models, once we have our, our, our, recovery approach, especially in the judicial part, which we will put in-house. Well, once we will have that solid and, and, and, and we'll be more precise then. Extra judicial slowdown, yes, some slowdown, but, by all means, it didn't stop, right? It's the mix is going slightly more towards judicial than towards extra judicial. It's, I think it's two effects. One is, inflation.
I have to assume that if you take the more vulnerable part of the population and you apply food price increases to them, that they will have, at the end of the month, a bit less, right, for the voluntary repayment plan. So I think part of it is inflation, but inflation is receding. In fact, inflation is expected, right, to go back to very moderate levels. The other part is that slightly older portfolios, right, bought on the secondary market, you buy them for a lot less, right? But they also tend to be a little bit less prone to extrajudicial recovery because the, let's put it this way, the debtors have probably already been contacted previously about their ability to repay.
So there, too, it's probably a little bit also a question of mix of what we've been buying. Do I see a further impact of that mix effect? No. So all in all, I would say, there is no reason to assume that the extrajudicial part is going to further slowdown , right? It's just probably a slightly different mix that we have to get accustomed to in the recovery and the cash collection. That's how I would phrase it, and that's about as far as I would go in terms of predictions. NPL Law, you... Well, it's, we have to be careful if we comment this, right? Because obviously we are not the government and we are not parliament, right? So, I can't speak for institutions that decide.
From what has been said in the media, and you've read it like we have, that law is not currently on the table, right? It is possible that some variants might be, you know, proposed, but in completely different terms and with great care not to damage the NPL market. So I think we're looking at something that's going to have a very similar trajectory that the tax had, right? The windfall tax. Over the summer, when the first ideas were floated, we were thinking about tens of millions of euros of impact on a bank like us. We've now approved Q3 numbers with zero impact because we brought it to capital, right? So there was a bit of uncertainty, and that's never helpful, right?
But it ended in a very harmless way for us, right? And I think we can assume once again, so I want to speak respectfully about things that are the government and parliaments to decide, and not us, right? But I think we can assume on the NPL side that the same has happened. I'm using the past tense, so not expecting any issues on NPLs in terms of legal framework.
Thank you.
Was that it, Simonetta?
Yes, yes. Thank you.
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Thank you very much. In that case, also on behalf of my team who's here, we hope it was useful. Martino is, as you know, available always for additional questions. And, we will be in touch again, I think, at the full- year results, hopefully with the guidance delivered. Thank you very much.