Good afternoon, this is the Chorus Call conference operator. Welcome, 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, they may signal an operator by pressing star and 0 on their telephone. At this time, I would like to turn the conference over to Mr. Frederik Geertman, CEO. Please go ahead, sir.
Good afternoon, everybody, and welcome to our first half 2023 results call. We have a rather special set of numbers for you today. We post a record net profit excluding PPA in the first half of this year. I would take you straight to page four of the presentation for the summary. Net income for the quarter of EUR 45 million, 20% year-on-year. First half 2023 net income at EUR 91 million, +26% year-on-year. We posted results due to loan-loss provisions, which in the quarter were EUR 6 million, of which EUR 9 million were provisions against macroeconomic risks, so against performing loans. That's the management overlay. The regular cost of risk is at EUR -3 million, therefore, negative due to write backs on certain positions.
Total provincial management overlay is now at EUR 65 million. We update the guidance to EUR 160 million for this year. Our previous guidance was EUR 150 million, which we posted in February. Our business plan target for this year originally was EUR 137 million. CET1 at 15.01%, excluding as, as we normally do, the net income of this first half year. We have approved in the Board today the new dividend policy, which increases the payout ratio of the bank. We have a progressive mechanism with the distribution of 50% of consolidated net profit attributable to Banca Ifis, up to EUR 100 million, and total distribution of the excess of EUR 100 million net profit.
Therefore, a significant acceleration of our dividend policy, respecting, of course, all the need for capital for our growth and the regulatory constraints. Page five, net revenues. We see a good acceleration, year-over-year, +8% in the quarter, we post EUR 173 million. The breakdown for Q2, commercial banking at EUR 87 million. It was EUR 88 million last quarter, I remind you that that included EUR 8 million of capital gains on disposal of certain equity stakes. NPL revenue is quite resilient, EUR 67 million. They were EUR 65 million in the second quarter of 2022, non-core G&NS at EUR 19 million continues to provide a recurrent and stable contribution. If we look at the first six months, revenues, bottom left, we also see +8%, like the Qo Q.
Very robust commercial activity on page six. This continues. The bank keeps outperforming in terms of market dynamics, the market itself, we have +7% factoring turnover. That doesn't include the effect of our restructuring of the business of factoring with the public administration, where we have fundamentally reviewed our business model following the application of the new DoD. On the right hand, new leasing underwriting, +9% year-on-year, in line with the market. I always remind the audience that we don't do real estate leasing, we don't do nautical leasing, it's always small tickets with quite a good acceleration in equipment and in tech that continued in this quarter, which is probably interesting in the light of the macroeconomic dynamic.
On page seven, I want to take a very brief moment to talk about the transformation of the bank. You will remember that we wrote a business plan where one of the most important elements was the digital transformation. The meaning of page seven is that throughout the value chain, the bank is on track, actually a little bit ahead, with its transformation. We have on client origination and partnership, by now, a fully active multi-channel lead origination approach. We have a full, fully digital rental capability that's, that we're deploying in tech, and we have new digital origination tools, especially geared towards cross-selling and cooperation amongst business lines. The client onboarding is by now up and running in a fully digital mode.
We have a fully digital end-to-end sales process for lending, transportation, leasing and rental tech, no paper involved and all documentation done remotely. New digital onboarding tool for corporates, we can state now that in the first half of this year, more than 70% of our contracts were digitally signed. This is progressively still increasing. On the after-sale side, client management and commercial development, the Ifis4business platform keeps expanding and absorbing additional customer needs, interaction, transaction, cross-selling for all core banking products. We now have all our factoring product, all our factoring customers active on this platform, generating more than 100,000 online transactions per year. Where transaction would mean, for instance, the upload of an invoice or the request to increase a limit.
In Q3, we will further customize and extend it to leasing and rental, where we have another 70,000 SME clients waiting for this to be available for them. On risk and credit assessment, this is the part that's a little bit more internal. We're fully digitalizing the whole credit assessment and decisioning process. In leasing and rental, more than 60% of the decisions are now automated. In general, we have an approval within four days for leasing products below EUR 200,000. The new platform is now becoming operational for factoring, and within the year will be similarly active on digital decisioning for the low risk decisions, therefore, freeing up significant operational capacity of the bank. It is really on all aspects, a full transformation of the business model.
To NPLs on page eight, quarterly cash collection, EUR 98 million. If we take the first half of the year, it's best collection result ever. If we take revenues from judicial and extrajudicial recovery, we've got EUR 69 million in Q2. We have negligible apparent impact from the interest rate or the inflation environment. We still don't see a significant effect on the customer's ability to pay, as is apparent from the cash numbers. We keep obviously monitoring this. One would have to assume that at some point, some effect of the inflation and the GDP growth will be apparent in the debtors, but for now, the results are as we discussed. We sold tails of NPL portfolios for modest book profits.
We sold about EUR 0.7 billion of gross book value in Q2, and we informed the market that we will book the Revalea integration costs up front in the second half of this year. Similarly, as in commercial banking on page nine, the digitalization of the division is ongoing. That is true in the recovery strategy, where we enhance portfolio monitoring, and especially, we do a lot of data enrichment of the NPL positions, therefore, you know, contributing to a higher quality recovery strategy. We have a semantic document reading engine based on AI that's now operational, where we avoid to have to go through documents and classify them ourselves.
75,000 documents that were part of an onboarding process, were automatically classified in the last 18 months with a process accuracy that is extremely high, as you can see. We automated also the collections or the payments that we make to the public administration and the collections. Payments that we make to the public administration have to do with all the courts proceeding obviously. You can imagine with our volumes, those are a lot of payments. We integrate with the systems of the Italian Ministry of Justice to maintain fully automatic payments to all public administrations. Finally, reconciliation and monitoring. As you can imagine, 1.6 million debtors, we receive a lot of payments.
Reconciliating that, those flows, it's a lot of work, and giving the client, the debtors, an easy way to pay that's digital obviously makes a lot of difference. We're now automatically reconciling close to 80% of all the payments that come in, and we have the numbers that you can see on the payments that the clients, the debtors, or the clients, however you may call them, make. There, too, in the NPL business, the digitalization process of the bank is fully on track, and we are, we believe, currently, the industry standard in terms of small ticket NPL management, given this technology that's made to work. Page 10, costs. We have the impact of inflation substantially countered by efficiency.
You see that we have EUR 4 million costs that are basically regulatory contributions to the funds of the restructuring funds of the Italian banking systems. Other operating costs, you see that the impact of inflation is more than offset by contract renegotiation and demand management. Here we have year to date, EUR 50 million IT investments, substantially stable Q o Q, as these projects that I mentioned go on. We have EUR +8 million costs directly linked to NPL recovery. Those are variable. They're connected mostly to a very significant portfolio that was onboarded. It's connected to future revenues, and you see that we have some increase of cost of personnel.
It's still quite marginal, driven by the accruals that we've made for the collective contract renegotiations that, that, that are ongoing in the Italian banking system. Overall, you can see that we are financing the transformation of the bank through a very good control of costs, where you see increases, they're mostly connected to. They're, they're variable, first of all, and secondly, they're connected to portfolios that were acquired. Page 11, cost of risk. The loan loss provisions in this quarter were EUR -3 million. We made an additional EUR 9 million management overlay. We did EUR 5 million in Q1 and EUR 9 million in Q2. That's another 14. That now leads to a total management overlay of EUR 65 million.
That's reserve, that's there in case we have a significant and strong deterioration of the macro scenario that until now has not materialized, this looks like a very, very comfortable amount. It's more than 1% of the loan book, of the Exposure at Default, which makes it a significantly higher management overlay that we see in the Italian banks in general. Ratios. The gross NPL ratio at 5.9, excluding the past due versus the public administration, which is collectively a good payer, but normally a late payer, it would be 4.5 gross, net 3.9 and 2.4, respectively. Moving on to the macro scenario. We talked about, you know, the provisions we made and the expectations we had at the start of the year.
Prudently, we had imagined a year in which the situation would become a little bit more complicated in terms of cost of risk. We had inflation already significantly picking up. We had energy costs significantly picking up at the start of the year, and then the Ukraine, the war in Ukraine came on top. We monitor obviously, what, what, what's going on. If we look at forward-looking indicators that the market likes to generally discuss with us, we have factoring, of course, which is a business which is very sensitive to macro deterioration. Normally you would see their indicators turning bad much before the cost of risk increases. One of the things we monitor are the payment days.
You can see that in Q1 and Q2 2023, those are actually at historic lows, meaning the clients are particularly disciplined. At least our clients are particularly disciplined in observing the payment days. You can also see it in the ratings, right? You can see that they're substantially imbalanced in terms of increases and decreases of the rating changes of the customer base, where +16% had an upgrade, -14% had a downgrade. No change, 70%. We also don't see any issues in the ratings, and the probability of default, as a consequence, is still quite low. We're below the data we had at the start of 2021. We reserved against macro risks. We always get questions on that.
We're an SME bank and understandably, right, the question is, okay, do you see impact of GDP contraction? Do you see impact of supply chain disruption? Do you see impact of the energy costs? We can discuss about the reasons, but what I can state is that until now, we don't have indications of a risk deterioration in the credit book, not even using forward-looking indicators, which, of course, doesn't mean that it won't happen over the next 12-18 months. It's not a prediction that things will remain like this. It's the statement that until now, we appear to be in an extremely benign scenario, as also proven by the cost of risk. Page 13, capital. We remain above 15%.
You all remember that in the business plan, we said that, that we would, over the business plan, remain above 14%. Total capital at 18.04%. The changes, 50 basis points, mainly due to factoring seasonality, so a bit of pickup in risk-weighted assets, and 7 basis points due to the increase of exposure under the calendar provisioning framework of our loans. Page 14, the guidance. On the basis of this EUR 91 million of net profit, we increased the guidance to EUR 160 million. The key assumption being that there would be no, in the second half of the year, major geopolitical shocks, no significant deterioration in macroeconomic scenarios beyond what's already, you know, predicted, no relevant regulatory changes. We update this guidance on a couple of considerations.
The positives, well, first of all, obviously, the net income we posted in the first half of 2023. We made about 60% of the previous guidance in the first half of the year, which is encouraging, of course. The cost of risk, risk being still below expectations, reflecting very resilient asset quality. Historically, the prudent provisioning of the bank, right? We have these overlays now at EUR 65 million, as I mentioned. Minuses for the second half of the year, the expected increase in cost of funding, which we want to consider, and the decision to account it up, account upfront for Revalea acquisition and integration costs, which will be in excess of EUR 10 million, slightly, actually, slightly closer to EUR 12 million, with a few small offsets. You can count roughly EUR 10 million, right?
On the basis of these considerations, what we will not do is double the EUR 91 million that we had in the first half of the year. First of all, because Q3 historically is a soft quarter in all banks, and that's also true for us, especially in the NPL business, when the courts are closed, and also because we have these effects, so we want to account for those, and we update the guidance therefore, to EUR 160. Page 15, important confirmation. Our chairman had announced in April, I believe it was, that the board had started a review of its dividend policy. The bank has become, over time, recurringly, and on the basis of its core business, significantly more profitable than it has been historically.
Due to synergies, due to commercial steering, due to digitalization, due to process efficiency, due to digital sales, to all the, the collection of transformation projects and the rate scenario. On this basis, the amount of retained earnings was significantly in excess of what we believe is necessary to fund the continued growth of the bank. Therefore, a progressive dividend policy was deliberated today by the board, where we have a payout ratio, where until we reach the amount of retained earnings that we consider opportune to finance the future growth of the bank, a threshold that's been set at EUR 100 million net profit. On those, we apply 50% payout ratio, that's what we had historically. North of that amount, so in excess of that amount, the payout ratio increases to 100%.
We made a little example here. Let's assume in 2023 that the guidance is met, we would have, on the left-hand side, EUR 160 million net profit. On the first EUR 100 million, we'd have a payout ratio of 60%. On the remaining EUR 60 million, we'd have a payout ratio of 100%, therefore EUR 60 million. That would lead to consequent potential dividends in 2023 of EUR 110 million, which as last year, we will pay in two installments, one on the nine months results and one at the closure of the year. Conditions for this to happen, obviously, beyond naturally making the guidance, which is a hypothesis, right? First of all, we would apply these these dividend policies if the supervisory capital requirements are exceeded by a significant margin.
CET1 today is 8.65%, CET1 is 15%, you can draw your own conclusions. We stated, and we maintain, that we want to keep a CET1 ratio of in excess of 14% over the business plan period, and we need obviously to be sure that we have the capital for the growth rate of the 2022-2024 Business Plan. On the basis of those confirmations, the board will propose to the Shareholders' Meeting in April, the dividends consequence to the policy that today has been deliberated. Funding plan, very relevant item in our world today. The banking system and financial system has obviously changed in the last one or two years. We have a EUR 2 billion TLTRO that expires in September 2024.
We have reached a very comfortable liquidity situation now that allows for a possible earlier partial repayment. Especially in this last quarter, I want to mention that we had the remarketing of EUR 400 million of senior securitization notes from a leasing portfolio to a primary Italian bank, confirming the, the, the, the asset quality. We had another EUR 400 million transaction, which was the restructuring and ramp up of the securitization of an unsecured NPL portfolio. Those are the judicial payment plans, which are an innovative asset class, obviously, but a very safe asset class. We need senior notes so to be refinanced in the institutional investors market.
We, we like this transaction because it confirms our ability to finance ourselves also innovatively based on our asset mix, by leveraging these very specific types of assets. I remind you that we have in excess of EUR 700 million proprietary portfolio that matures by September 2024, that can also not be reinvested. On the basis of these things and of the future initiatives, we believe that the TLTRO repayment is definitely a well-managed issue. Next quarters, we will issue senior bonds. We further increase the retail funding through different channels and maturities, and we have, obviously, the regular activity of the treasury in terms of repos with institutional counterparties, and those are our actions for the remaining part of the year.
I will not take you through the quarterly results in detail, as I'm sure you can read them yourself, and I would like to make myself available for questions if you have them. In the interest of time, I know you have probably other calls, I'm talking to the analysts now. I think in the interest of time, we can go to Q&A. Thank you.
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 one on their touchtone telephone. To remove yourself from the question queue, please press star two. Please pick up the ear on the receiver when asking questions. Anyone who has a question may press star one at this time. The first question is from Manuela Meroni with Intesa Sanpaolo. Please go ahead.
Yes, good afternoon, and thank you for taking my question. The first one is on your guidance. You updated your guidance for 2023 to EUR 150 million, but if I annualize the first part, I can reach EUR 180 million. You already mentioned the one-off costs related to Revalea for EUR 10 million, but could you just explain us where do you expect the second half to be weaker than the first half? Maybe it's longer provision that has been particularly low in the first half. If you can please give us an idea of what is the cost of risk embedded in your guidance. The second question that is related to the first, is on risk. What are the main risks that you are expecting in the coming quarters?
First question on the asset quality, I'm wondering if you are seeing some sign of economic slowdown, and what are the key metrics that you use to monitor the evolution of the asset quality? Last question is on the cost of funding. You reported a significant increase in the cost of funding from 2.24%- 2.76%, if I'm not wrong. Is that, is increase in line with your estimate, and how much is the cost of deposit right now and the increase quarter-on-quarter? Thank you.
Thank you, Manuela, and hello. On the guidance, I, I, I gave some elements already. I'll just go through them. Obviously, like you did, we also imagined, right, if you do EUR 91 million in the first half, where are you gonna end up, right? We're not doing times two. I would, I would mention three elements. First, revaluation costs, we already, we already, we already said that. Secondly, net interest income. The net interest income is going very smoothly if we look at the the gross interest that we that we collect. Cost of funding in the Italian banking system is increasing.
Keep in mind that we're not a retail bank, so the stickiness of a large lake of current account deposits is something we can't benefit from to the same extent as a retail bank could. Therefore, you mentioned the cost of funding, right, contributing. That's expected to increase a bit, right? As it's been increasing in the first half of the year. Do not expect, on this basis, the net interest income in the following quarters, right, to increase like it has in previous quarters. That's gonna create a little bit of a slowdown in the growth. Finally, provisions. That's probably a line item where we're being, once again, prudent.
For the second half of the year, we are posting, we're imagining, right, that we will post provisions that are far, far higher than the net three that we would have had on the basis of a normal cost of risk without overlays, right? Far, far higher, right? We like to plan for a slowdown. If it doesn't happen, okay, that's fine, right? We have GDP contracting now in Italy. The last quarter's results that were published by the statistics office were confirming this. There's a lot of uncertainty around. Normally, when you have GDP slowing down or even contracting, after 12-18 months, right, you're gonna see it.
We were expecting it a bit earlier, still hasn't happened, but I think when we give a guidance to the market, we'd rather, right, not assume that the macro scenario would be, you know, ever so benign, forever, right? The guidance of 160 does include, in answer to your question, a very different cost of risk than what we've had normalized, right, in the first two quarters. Main risks, that's connected, right? The main risk may come from macro scenario. We don't see anything internally in the bank that worries us. We might see, you know, further economic slowdown. We might see some, you know, economic or financial shocks. We had some issues with certain banks abroad, right, that were a complete surprise.
There's a lot of liquidity being drained from the market. Definitely one thing that we would like to monitor very closely, right, is the liquidity position. I remind you that we have a liquidity coverage ratio that's north of 1,000% now, so very comfortable. The reason we did that was both to anticipate, right, the funding measures that we need to do for the TLTRO, and because we want to be in a position where, you know, in any scenario, we don't have to worry about that. Of course, I also want to mention that, you know, we have the management overlay, so we're not assuming to consume that at all in 2023, right? That issue will probably come up in 2024, 2025.
We'll see, right, if the macro scenario, in the end, doesn't warrant this type of extra provisioning, and in that case, right, that will become obviously an item for discussion, right? Because at some point it should flow back. We haven't assumed in the guidance that to do that. Asset quality, we use the, the, the normal metrics, right? We look obviously at Stage 2, we look at past due, we look at payment discipline, and I think, and we look also just in terms of investment climate, we look at the CapEx of, of, of the SMEs as we serve them with leasing products, right?
I won't, you know, mention all the things that you would expect in a bank and that, you know, we have, because they're probably, you know, the same for all banks. When we look at asset risk, we, we, we, we very carefully make sector differentiations, and we follow sectors, especially in terms of payment discipline. As I mentioned, it's, it's maybe also because of the cost of credits being a bit higher, we see a lot of care of the clients in paying on time, right? In keeping the payment cycle short, you saw the 75 days, right? I would mention as a, as a distinctive metric that, that maybe it's a little bit more available to us, I would mention that. Finally, cost of funding, your fourth question.
Whereas on cost of risk, we had a year that, that's panning out rather more benignly than we'd expected in the when we made the budget. The cost of funding is going roughly as planned, right? That increase in cost is materializing. It's both materializing because of the base rates, and it's materializing because, for instance, in retail, right, we've had competition and therefore, if you look at just the rates, right, that are offered for term deposits now in Italy, 12 months, you'll see them between 3.5% and 4.25%, right, on the market. A very flat curve, because a four-year term deposit pays between 4% and 4.5% on the Italian market, right? Very flat curve. Already on 12 months, you see quite, you know, steep numbers.
Obviously you have the base rate effect, right? I'll give you just a few numbers in terms of what's been going on in the funding book. We have a QoQ increase of 52 basis points overall, right? In the cost of funding. Some of that reprice in a shorter timeframe, like, you know, debt versus banks, right? 74 basis points. TLTRO, 84 basis points. Securitizations, 75 basis points, whereas deposits are much slower. It's still very attractive to fund ourselves with the deposits. It's lower in absolute terms, and it's increasing less, right? The increase in cost of deposits, which you asked for, was 35 basis points, QoQ. Vast majority of that is term deposits, right? Sight deposits, the increase in sight deposits is nil, basically.
Of course, we have a lot of term deposits. As you, as you look at us, you know, we've been able to both benefiting from the rates scenario and by a very, very robust repricing on the asset side, we've been able to definitely protect the margin and increase it. We are sensitive to cost of funding, and we plan for it. I hope I answered, Manuela.
Yes, thank you very much. Very clear.
The next question is from Irene Rossetto with KBW. Please go ahead.
Yes, hello to everyone. Question from inside. The first one is about the TLTRO, if you can detail how you expect it to impact the division. Number two, what is your 2024 guidance in terms of net income? Is the EUR 160 million target of the business plan still valid? Number three, assuming a net income of EUR 160 million in 2023, your new guidance and 2024, the one from the business plan, are you going to pay a total dividend of EUR 220 million in 2022, 2024? This, if my calculations are correct, this would imply a dividend yield of 25% in two years.
Number four, the NPL revenues and the cash collection are flat, both Q o Q and year- on- year. There is also a limited increase in order of assignments and the voluntary plans. How do you see the NPL market? Is it mature, or, in your opinion, does it still offer upside potential? Thank you.
Yeah. Thank you, Irene. On TLTRO, let me first of all remind everybody of the deadline, right? The, the TLTRO is scheduled to be repaid formally in September 2024, right? We are considering partial earlier repayment. What you should imagine is to see materializing at some point, so installments higher than EUR 500 million that materialize before the 2024 date. The exact timing, we'll, we'll decide it a bit further out, we are in a position where we can think about progressively reducing it, rather than waiting for the, for the, for the deadline. I think the first possible installment could be, could be within 2023, right? We'll decide it in Q4, I guess.
Installments of about EUR 500 million, potentially the first one materializing at the end of 2023, potentially, depending on how the overall situation develops. You know, that's possible, I want to state it, because we have anticipated. We've made the significant transactions on the securitizations. We've made them earlier, significantly earlier than we had planned, just to get it behind us, basically. That's behind the liquidity position we have now. That's obviously, you know, giving us now the flexibility to decide, right, what to do with potential earlier repayment. Obviously, moving these things earlier means that you get the cost of funding impact earlier. Consider it an investment in prudence. Okay?
Also re-remember that, before 2024, right, we have maturing in the proprietary portfolio in excess of EUR 700 million of instruments. Those are mostly government bonds, right? That would be very easy not to invest, right? That could also therefore contribute to the repayment of the TLTRO, right? Giving you the elements that make us very confident that it's a, it's a, it's a manageable, it's a manageable thing. 2024 guidance, we have in year one of the business plan, which was last year, we did the results of year two, right? In year two of the business plan, we're now giving a guidance that is equivalent to the target in year three, right?
It appears that we are on track to remaining ahead of one year, right? The question I think, is natural, what to do with 2024. Our position for now is that we, well, phrase it like this, we do not have reasons today to, or elements to significantly change the guidance of 2024, right? We want to, to, see this uncertainty around cost of risk, especially, right? How this develops, and also the management overlay, how it develops, right? Whether it will, in the end, be necessary or not. Before we have a bit of clarity on that, we think it would be probably premature to touch the guidance for 2024. I would, just consider the business plan target valid.
If you look at what's been happening in the business, until now, you can probably see why we are not overly concerned about meeting it. We try to meet it even this year. Touching it now, once again, we think it is premature. In terms of also, you know, redrawing a business plan, the business plan is not just financials, it's also product, projects and products, right? We are nicely on track with all the things that I mentioned from the two slides on digitalization. There's a lot of work that we want to do, and we'd like to have it behind us when we make, when we make a new industrial story, if you will, right? That, that, that gives an industrial rationale for what we're gonna do the next three years.
We're leaving the business plan there, for now. We're executing on it, and it's a little premature, especially because of the risk scenario, right, to touch the guidance for 2024. We'll, we'll get back to it in six-nine months, I guess, right? Reconfirming or, or maybe, you know, adding some info. Yeah, you made a very simple calculation. I can't argue with the logic on dividends. If I, if I hear you correctly, you said, "Okay, so if you make EUR 160 million this year," which is the guidance, "and if you make EUR 160 million next year," which is the guidance, or the business plan, right?
Based on this progressive system, you would have twice dividends of EUR 110, and therefore you pay out in two years, EUR 220 million. Yeah, that would be more, by the way, than the aggregate number for the whole business plan. We promised EUR 200 million of dividends over the time of the three-year plan, right? In two years, we would exceed that. And that would constitute, yeah, the numbers are right, a dividend yield of 25% in two years. You know, I, I, I can only confirm your logic and reiterate that obviously this is for the board to propose to the Shareholders' Meeting. The board proposes it, if conditions are met. The conditions are entirely reasonable.
I'll state them again: excess of capital relative to the supervisory limits, which are much below where we are now, still CET1 ratio in excess of 14% over the business plan period. Of course, right, the, the, the, the, the, that we make the, the numbers of the guidance, right? This is something that we have to treat respectfully. There are, obviously, regulatory considerations. On the basis of these conditions, which once, once again, we consider them entirely reasonable, that would be for the board to propose to the Shareholders' Meeting. The NPL revenues, yeah. Flattish Qo Q. Collections, actually increasing a bit. We have this, this very nice cash collection performance in Q1 and Q2. On the market, for us, it's a core business.
Yeah, we see the market maturing, and I would share your, your words, right? You said, you consider it now, a more mature market, and I think there are elements to definitely consider it a more mature market. Lower NPL formation. That huge generation of NPLs that happened between 2011 and 2015, 2016, right, when it peaked, is behind us, thankfully. Slightly less buyers, also. Sometimes irrational buyers, I would add. NPLs coming on, on the market, being made available of, ever better quality. You get newer vintages. Banks are becoming a lot more, disciplined, and consumer credit companies, in terms of the quality of the documentation, right? You get better quality stuff. Primary market, slowing down, therefore, improving in quality and slowing down a bit, less often.
Secondary market, however, very lively. Also, I would say, in some cases, due to maybe some overly optimistic business plans, right? That were subscribed to in the last years, which make it necessary or opportune or attractive for these investors to offload the portfolios. If you look at what we, what we bought in the last years, the the share of secondary markets has been quite relevant, and those are very attractive transactions for us. For us, the the the the the competition for our game, right, is not necessarily on purchasing volumes, right? It's on recovery efficiency, right? A lot of what we're doing, and that's why I wanted to mention it on the slide, right, on, on, on the NPL digitalization.
A lot of what we're doing is becoming, always better, in, in line with a very responsible collection approach. I want to underline it, right? In terms of, you know, social responsibility versus the debtors. Becoming ever better at managing the stocks and what we buy. As a market leader in small tickets unsecured, which is, I think, clearly the case, right? As a market leader in small tickets unsecured, for us, the game, we think, is in excellence. We'll sort of, we, we, we can wait it out, right? In terms of, you know, competition. Certainly, we've had, quite some auctions where we, chose not to, not to go into pricing levels that we don't think are in line with today's cost of funding and today's macro environment. In this respect, the Revalea acquisition is highly strategic.
We purchased EUR 6.8 billion gross, EUR 250 billion net, roughly, that's pending regulatory approval, but, you know, I'm, I'm, I'm assuming now that that will come. In Q4, we'll, we'll onboard these, these portfolios, pending regulatory approval, of course. What the transaction means for us is basically, securing the purchases that we would have made throughout the business plan as of today. Our, our competitive behavior can be, quite relaxed and selective in terms of what comes onto the market, and that will definitely protect the profitability of the business, right? Yes, this market is maturing. It's probably going to be a bit more challenging for newcomers or, or players which haven't gone through a couple of cycles. I always point to the appendix. I urge everybody to read it.
If you look at long-term, right, how the models predict we perform and how we actually perform through a number of cycles, we've been outperforming our own models, our own pricing models. We're quite confident that, you know, the stocks that we have and the purchases that we make are done responsibly, and therefore, you know, we see the maturing of the business. You know, from a market leader's perspective, it's not something we necessarily worry about too much. Okay? I guess these were your questions, right, Irene?
Yes, thank you very clear.
The next question is from Andrea Lucidi at Equita. Please, go ahead.
Hi, thank you, thank you for taking my question. The first one is on the securitization you have made. You said, correctly, that, somehow you anticipated some of the increase in the cost of funding. Just to understand, which is the cost of these securitization, every plus spread, just to know it. The second is related to your statement about the evolution of NII. Do you expect NII to slow down in the second half versus the first half? We already see some slowdown in the second quarter versus the first quarter. Just if you want to move on, maybe to next year, assuming volumes to be flat.
Just to understand what is your point of view about interest rates stabilizing, and then, is it possible to have, to find some repricing on the asset side that will more than offset the increase in cost of funding? You to have a benefit on NII side, or, in general, the increase in cost of funding, given that the slowdown despite the second quarter, in the second half, would be even, even higher, and so to more than offset the increase, the benefit you have, asset side. Just to have your comment and your view also, also going on with the rates stabilizing. Thank you.
Yeah. I'll, I'll take the second one first, okay, and then we'll go to the securitization. You know, to really answer this precisely, Andrea, would take from me a crystal ball, right? I'll give you some feeling for what, what, what we expect. We expect some further increase of the rates and some further increase, and then a stabilization. I think the slowdown in Europe is now ascertained. I think, you know, the, the, the, it's just my opinion, but I think at some point, you know, central banks are gonna want to see the, the extent to which what they've done, right, has, has been effective. I expect the rate scenario to stabilize with a bit more increase, right? Then I would assume just cautiously that it remains there.
I wouldn't foresee it dropping very quickly. I don't think we have elements to imagine something like that. On top of that, I think, we should argue probably or imagine a bit of spread increases, not... I don't mean government spread, I mean, just spread in terms of competition for the deposits, right? liquidity is being drained, TLTRO will be paid back, tapering of the asset purchase program is ongoing, a lot of liquidity is gonna disappear from the market. There's still a lot of it around, right? Companies are very liquid, for instance, it's starting to reduce a bit, you know, there's still an insane amount of liquidity on the corporates current accounts, right? you know, some decrease of all that liquidity is probably going to lead to a bit of competition, yeah.
We have rates increasing and then stabilize, increasing slightly, and then stabilizing, but we might see still some spread effect, right? On the basis of that, what I would say is don't expect net interest income to continue growing as you've seen it over the last years, or year, I should say. We have levers in order to protect the margin, right? One is obviously repricing, as you already said, and if there plays space, you know, for repricing, the answer is most definitely yes. If we look at the dynamism of the underwriting and the progressive expectations, right, of clients, that credit is, has become more costly, I would say yes, we can further reprice.
In this respect, I think, Ifis is a very interesting play because of the duration of our assets, we, we published last quarter, right? The duration of the assets in the various loan books. Even the long-term loan books, right, are around about three-year duration, right? That means that we don't have 20-year mortgage books, right? 20-year retail mortgage books. We don't have the very classical long-term corporate lending of six, seven years that's been done, right, expansively, right, by universal banks in Italy in the last years. Our leasing is short, relatively short, three-3.4 years, I believe, duration of the leasing book, medium to term lending, similar. Then we have factoring, which is very big and which is very short, and where we can do unilateral repricing if we have justificative motives.
Sorry for the Italian, but that, that's what you need, right? On a book like that, you can reprice, and if you reprice, you don't have to wait 15 years for it to see the effects. Most definitely, one of the things we can do is reprice. Second thing we can work on is volumes. We spoke about capital adequacy, we spoke about liquidity. Both of these allow us to look favorably to market share growth, right? We don't necessarily being a challenger, we don't necessarily need a huge GDP growth to justify growth of the loan book. Market share for us is something we can, we can, we can expect to increase. The whole competitive situation commercially of the bank makes us, I would. It's never easy, right? Because it's commercial, it's sales, right?
Makes us at least want to have the ambition, right, to grow volumes. If you combine that, right, I wouldn't say we are, we would be comfortable or happy with the contracting net interest income, right? Our challenge will be to compensate the expected increase in cost of funding. That's, I guess, without making too firm predictions, but that's how we're dealing with this issue. In terms of securitizations, right? You ask for the costs. I'll just give you the numbers, okay? The leasing securitization has Euribor + 100 basis points as a pricing, roughly, and the NPL securitization, what Euribor + a range of 140-150 basis points. Does that, does that answer your question?
Yeah. Thank you.
That's three years, in terms of duration. Saverio Bonavita asked me to specify that to you, okay?
Many thanks.
All right.
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. I turn the conference back to you for the closing remarks.
That's good, because it's four minutes to three. Our, our audience has other calls, so we, we were on time, we were disciplined. Once again, thank you for your time and attention. We'll, we'll talk again in three, four months when we have the Q3 results. Once again, we're, we're, we're quite pleased and quite, quite optimistic about, about the way the banks are developing. We hope you can, you can share this. Have a good afternoon.