Good afternoon. This is the protocol conference operator. Welcome, and thank you for joining the Banca Ifis third quarter 2021 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 Frederik Geertman. CEO, please go ahead, sir.
Good afternoon, everybody. Welcome to our third quarter results conference call. I'm here with Martino Da Rio, as usual, to illustrate the results. We are presenting a quarter that confirms the positive trend of the first two quarters. Results have developed better than expected as we have benefited from a nice macroeconomic recovery. We have a net income in the third quarter of EUR 32 million, leading to EUR 80 million in the first nine months of this year. We booked revenues in the quarter of EUR 157 million, which is the highest of the last six quarters. Excluding PPA, EUR 151 million. We have very good NPL cash collections, EUR 82 million, which are up significantly also against 2019, not only against 2020.
We've got loan loss provisions of EUR 20 million, which includes EUR 8 million of extra COVID provisions in our NPL portfolio and EUR 5 million on the credit portfolio for potential concentration risk. These are both, I would say, prudential. Lower range of our full year guidance for this year has been achieved in the third quarter. We gave a guidance of EUR 80 million-EUR 90 million, and we're at EUR 80 million today. We updated. We are giving a guidance of EUR 570 million-EUR 590 million for revenues and net income of EUR 90 million-EUR 100 million. CET1 at 11.68, increase of 24 basis points. Without La Scogliera, 16.2% CET1 ratio.
We'll give some update also on the transfer of La Scogliera to the Canton of Vaud in Switzerland. I'll give you some update on that timeline, basically, in an appropriate slide with our comment in a few minutes. Getting to the third quarter results. Moving to page five, net revenues. The revenues were rather strongly up. You see that in the third quarter we booked revenues that were even slightly higher than the second quarter. That doesn't normally happen in a bank. Third quarter tends to be a bit lower than the second. We had August as usual, that was slow because it's a holiday month.
July and September were both so, I would say positive that overall we managed to equal Q2 revenues. NPL revenues were at EUR 61 million, commercial banking at EUR 74 million. We should add that we also have a EUR 10 million extra, which is not PPA, but it's a TLTRO benefit. You will recall that the TLTRO rules stated if you meet certain lending thresholds, then you get a 0.5% bonus. That came in, was worth about EUR 10 million and came in in Q3. There's a little extra that's not entirely repetitive, obviously, right? Moving to page six. We mentioned we benefited from quite a nice macro environment.
We also want to stress that the bank has been, you know, rather dynamic and quick in reacting to commercial opportunities. It's not just, you know, some tailwinds, it's also a very fast and dynamic approach to commercial opportunities. You'll recall that in 2019, we launched lending guarantees by the state, which gave quite a contribution. It's the green part of the chart, right, during 2020 when that became very popular. In 2021, we had another one of these cases, Superbonus, 110% credit. That's basically tax credits that can be traded. The bank purchases them of companies that benefit from them, that install energy saving equipment in households and in businesses.
You can see how the composition of revenues just by adapting to these two, or stocks, I should say, just by adapting to these opportunities can change over time. I think that's particular of a bank like Banca Ifis. We have a versatility that allows us to capture opportunities, right? I want to clearly say that it wasn't just macro tailwinds, but it's also been commercial adaptability. We might have put another chart in here on the NPL side where, you know, similar things have been done in order to maximize the productivity of the collection business.
You know, this is basically the idea and it's a point that we wanted to make, and that I think will also help us during the plan. Going to page seven. We want to update you on some news that we gave a few days ago. We were one of the first three Italian banks to join the Net-Zero Banking Alliance. The other two were the two market leaders. We're pleased to have been in this first group. We think it is a relevant fact for our positioning, and we think it is also an economically relevant fact of in the future.
The Net-Zero Banking Alliance is basically a commitment in which the largest and most significant financial institutions commit to getting to net-zero emissions, not only in their own operations, but in their financing. There are intermediate targets for 2030, and if you commit to this alliance, then you commit to giving your targets and to reporting on them. It's both, in my opinion, and in our opinion, it's both a civil duty, but it's also good business. We think that and it's good capital market strategy, I think. We think that we are very well positioned to make quite ambitious statements on the quality of our loan book expressed with this criterion.
We start with a fairly limited exposure on priority one and priority two sectors, and we will be able, I think, to be at the forefront of this type of phenomena, of this type of movement. Once again, much better to lead and to help your clients, right, to make the adaptation than to be a follower in these things. Moving to page eight, NPL collection, EUR 82 million. As we stated before, actual cash collections exceed the model estimate. That's no surprise. It was true also through COVID, so we're quite proud of the resilience.
We initiated in the second quarter, as you know, a detailed review of the potential long-term impact of COVID-19, so we really went to look for places in which, you know, maybe some additional prudence was, let's put it this way, could be justified. We made another EUR 8 million of provisions in this exercise, and we're slightly above three-quarters of the analysis. You know, in the last quarter, we expect to complete the review and also to have a smallish additional impact still to be accounted for. On November second, we announced the completion of a very significant transaction. We bought EUR 2.8 billion gross book value from Cerberus Capital Management. It's 300,000 debtors.
It basically sets us in a good position to surpass our full year purchase target, 'cause we've already completed it now, being about EUR 3 billion. We're looking at another EUR 1 billion additional portfolios right now, so we're quite sure to do some more. The significance, I think, of this transaction is it confirms our bank as one of the few players operationally capable of pulling off this type of transaction. Onboarding a few hundred thousand debtors is not an easy thing. We take pride in doing this in a very smooth way with respect to both the organizations that sell and with respect, obviously, to the debtors themselves. Asset quality, page nine. We have a fairly constant situation in terms of ratios.
We have a slight increase. That's due to the seasonality in the size of the customer loans. It's typical in factoring that in Q3 your end of period stocks go down a little bit, and that's the reason why the ratios go slightly up. If you look at the actual exposures in terms of NPEs, you can see that except for EUR 1 million, they actually go slightly down, right? We booked EUR 20 million loan loss provisions in the third quarter, and they include, as I mentioned, EUR 8 million additional COVID provisions in our NPL portfolio and EUR 5 million for potential concentration risks. That means that naturally, if I can use that term, right, the cost of risk in the quarter was 20 - 8 - 5, and that's very low, right? It continues to be very low.
I think this is the same in our bank as in what's happening in other banks. Obviously, the extra provisions that we took are there to be able to be very well prepared and very comfortable when all the public support measures cease to exist, when the moratoria ceases to exist, when the other public measures on hiring and firing cease to have effect, and to be in the first months of 2022 present with very comfortable provisions in order to be able to accommodate what might come in terms of flows, right? Today, in our bank, as in other banks, we don't see yet the flows arriving. Moving to page 10, we're at the guidance. As we mentioned, we reached EUR 80 million, which was the lower range of the guidance for the full year.
We reached it this quarter. It was unexpected for us, too, meaning that we were positive, as we mentioned the previous call. July and September were actually really great months and August was slightly less slow than normally. You know, in deciding what to do given this result, we decided to update the guidance. Not updating it might have given the signal that we were expecting or which we would be expecting a bad fourth quarter, which we're not expecting at all, right?
In terms of transparency and in terms of, you know, signaling the right type of expectations for Q4, we preferred to give you a formal update and therefore to increase the guidance to EUR 570 million-EUR 590 million of revenues and EUR 90 million-EUR 100 million net profit. The same assumptions apply, right? Obviously, this won't be the guidance if really huge macro shocks happen, both on the pandemic level or on the macroeconomic level, okay? Capital ratio evolution from 11.44- 11.68. This is not the retained earnings that come in, this increase. What it is the seasonal contraction of the factoring volumes, right, that lead to slightly lower loans and therefore slightly higher CET1 ratio.
The profits are not yet in there, right? You can work out the numbers yourself. If you assume a reasonable payout ratio, a good part of the EUR 80 million that we book today will be retained earnings and those would constitute capital. Let me give you finally on page 12 an update on the move to Switzerland, and then we'll take questions. There have been also in the conversations we've had in the last month with investors, always some types of questions, right? Some desire to get updates. We present here a timeline, and I'll comment a little bit on the various phases.
In the eighteenth of June, La Scogliera shareholders meeting approved the transfer subject to the satisfaction of certain conditions precedent, including a favorable opinion from the Italian Revenue Agency. The feedback from the Italian Revenue Agency is expected by the end of December or early 2022. They don't give you intermediate feedback, so it is impossible to know during the process in what way they will reply. Therefore, we have no update on the content. We reiterate the statement we made last time. It's probable, but not certain. We expect the conditions precedent to be completed in January, therefore, and we shall present the plan immediately after in February together, I would suggest, with the full year 2021 results, so that you can appreciate stable numbers on 2021 and the plan, right, built on top of those, right?
The decision to go to February is both connected to being able to give you certainty around the Scogliera transfer and to have the full year presentation on the full year numbers in the presentation. Sorry, I was distracted for a second. The transfer will lead to 450 basis points of impact on the basis of the numbers of September thirtieth. I'm on the right-hand side of the slide now. We should keep in mind a few things.
Obviously, you know, we can't be certain, so we're developing a scenario in which it might not happen without making any changes to the statements that we made regarding what we expect, but we obviously have to be prepared for a scenario in which it doesn't happen. In this scenario, you need to keep in mind that in the first months of 2022, it is almost certain that the NPL rating in terms of risk-weighted assets for purchased NPLs on the basis of the EBA decisions, right, the European Banking Authority, will go down from 150% to 100%. This will generate 60 basis points of CET1 impact favorably, right? In addition, you will recall that we haven't yet put the profits in the retained earnings for this year.
That's putting us in a very comfortable position in any case, in terms of capital and CET1 ratio. We're developing a three-year plan and we've run the numbers now, and we think that we can present. In fact, we're certain that we can present a growth-based, attractive plan, even in a scenario in which La Scogliera doesn't happen. Having said that, there's no change in the statements that we've made regarding what we expect. All this is just maximum clarity and transparency. I will take some questions now, and I'm available for any additional clarification on this or on any other subject that you may find require some additional comment. 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 the 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 Christian Carello, Intermonte. Please go ahead.
Hi, everybody. Thank you for taking the questions. The first one is on top line trade receivables. We saw a positive trend in Superbonus 110. I think that this could go on also in 2022. I was wondering if there is any risk of clawback, so buying tax receivables or if there is any insurance for the future if the tax office is coming and saying that that receivable is not how you say approved. The second question is-
Yes.
The second question is on. I don't know if you wanna answer each question or.
No, no. Just give them all, and then I'll take them all together. Thank you.
Perfect. The second one is on NPL. We saw a very nice big transaction in NPL business just a few days ago, EUR 2.8 billion gross book value. We met at an NPL meeting just in September, and there were discussion about the prices of NPLs. I suppose that portfolio, I mean, if you can give some color in terms of vintage and in terms of prices, just I mean, in the sense of low single digit, high single digit. What are you seeing in terms of market price on NPLs? Third question, costs. Some extra costs could be booked in the fourth quarter related to La Scogliera, the transfer of the office of La Scogliera.
If you could tell us in the guidance you gave for the full year 2021 are included those costs. Can you give us an idea of the magnitude? Last two questions, cost of risk, the guidance short term and medium term. I mean, in the last few years we saw some pick up in cost of risk relating, for example, to the construction sector. If you go back to, let's say, few years ago, 2015 and 2016, maybe the cost of risk was very low compared to the last couple of years. This year, you've done some precautionary provisions again, on concentration of risk and on COVID-19 outbreak. I would like to understand what you have got in mind. I don't.
I know that you are going to present, you need to explain, but what is a normal cost of risk for the run rate for Banca Ifis? And finally, on capital, very clear, the managerial buffer with the lower weight in risk of assets on NPE. So you have a pro forma of more than 12%, 12.3% Common Equity Tier 1. I was wondering if the transfer of La Scogliera will go through, the excess capital, I mean, the additional capital buffer you will have could be, let's say, distributed to shareholders or do you think that the 40%-50% payout ratio is adequate? Thank you.
Thank you. That's quite a list, Christian. Thank you. Luckily I wrote them down. To question number one, the Superbonus business. Is there a risk of clawback? Fortunately, no, because when you buy the tax credit, you do it on the basis of the existence of documentation that makes the responsibility for the correctness of the tax effect fully on the player that is selling it, right? I'm sorry if this is not said very eloquently in English, but I'll try to say it again. The responsibility vis-à-vis the tax authority is not on us that has bought it, if we buy it with certain documentation. The only situation in which we buy it is if this documentation exists.
We've looked at this very carefully also with lawyers and everything, and the very clear consensus is that there is no clawback risk in this business for us. Okay? Then maybe you can, you know, conduct this business also in another way, but we will only buy credits that have that type of documentation that completely shields us. NPL prices. Well, let me say this. One of the nice things about the secondary markets is that prices tend to be, and what we've seen until now, prices tend to be okay. On this transaction, obviously, there's a player who's selling that's competent, right? We're talking about the professional player, so I'm sure they wouldn't be selling anything at the wrong price.
We're quite happy with the conditions at which we bought it, and we think the reason that we can be happy is that we have scale and recovery performance that allows us to price this correctly. It's exactly our type of stuff. It's small tickets, unsecured, banking and consumer. 300,000 counterparties with EUR 2.8 billion gross. You can work out the math. It's small stuff. It's exactly what we like. We can price this well and still earn nicely. Actually, we think that we made a transaction that is very nice for us, adds positively to the average profitability of our overall stock, and is a good deal for the people who have sold.
You know, the combination of these two things is possible when you're able, as we think we are, to extract value from these portfolios. Extra cost of La Scogliera. I'll give you the ballpark indication. We have two types of impact. We have a tax impact, and we have a fees impact, advisory fees on a success basis. If it happens, the advisory fees are to be paid and the tax impact is to be paid. If it doesn't, nothing is to be paid. Assuming it happens, the cost would be in excess. Combined tax and fees impact will be in excess of EUR 10 million. I underline that in the guidance we gave for the full year, and therefore for the fourth quarter, this number is assumed to be payable, right?
We're assuming in the guidance that we gave that La Scogliera will happen and that we will incur the costs. Cost of risk EUR 80 million, yeah, which is roughly what we expect this year, right? We expect an improvement. If you look at what happened historically, for a few years, the bank had a cost of risk which was a bit inflated because of a number of decisions, especially in the construction sector, that were made. At some point, the bank had acquired quite an exposure to Italian large constructors. That sector has gone through quite a lot of upheaval. Many of them actually defaulted. Over a number of quarters, the bank you know had to make the reservations, right, for the damage that was occurring in the book.
If you take that out, right, you get a more, how should I say, representative picture of the cost of risk in our book, right? Which is mostly, I remind you, factoring business, which turns rather quickly. I expect cost of risk to be reducing over time. If we look at our book today, we are very actively looking for places where we can place additional prudence. Now we believe is the time to put in place additional prudence, given that the COVID effect will materialize in the next few months, and given the fact that commercially things are going so well, so there's space. I expect cost of risk to develop better positively, so to go down.
I don't want to sound too tactical, but I would probably still prefer to see a plan which is not too aggressive in the reduction of the cost of risk. Okay?
But-
Go ahead.
Yes. On the construction, could you give us an idea of before, let's say, three years ago and, now, to the construction sector, how much represents of the loan book?
I think today it is marginal, not something that you would need in your spreadsheet.
Okay.
Okay. In the leasing portfolio, it's zero. All right. It was long-term lending to constructors, which has either been repaid or has been, unfortunately, disfigured. Okay.
Okay.
CP one, your last question. Yeah, we would go on the basis of what we show today, right, north of 12, right, and once the risk-weighted assets of the NPL business are improved, right, with the 100% risk weighting. We would go north of 12, including the retained earnings also. You know, adding to that, the impact of the potential impact of the move of the holding company to Switzerland, we would go in excess of 16. The way we interpret that is that it is a buffer that gives comfort and certainty around a rather generous dividend payout policy that, in our opinion, would be, historically was around 40%-50%, and that we would like to keep.
It would give us some strategic freedom, if you will, to maybe capture some opportunities. Obviously, I underline respecting the criteria that we have given on these types of transactions, i.e., in or close to our core business and places where we are able to give value, on an industrial basis, right? So where our skills will help improve the target. No transformation in M&A outside of our core businesses. Yeah. Still, you know, a little bit of extra CET1 space might give us a little bit more flexibility to maybe capture some opportunity if it were to arise. We are not foreseeing today share buybacks or a maxi dividend if the Swiss transfer transaction happens. It's gonna represent an end of a discussion around CET1 ratio, and we're happy to end the discussion, right?
No particular one-off measures are planned at all if it comes in. By the way, we haven't even explored this, but from a regulatory point of view, I don't think any of these would be much encouraged. I mean, that, you know, even before getting to the regulator, we don't see it. Okay, Christian?
Yes, very clear. Thank you. Thank you very much.
Okay.
The next question is from Manuela Meroni of Intesa Sanpaolo. Please go ahead.
Good afternoon, and thank you for the presentation, very clear, and also for providing us with the divisional database that is extremely useful. I've a few questions. The first one is, again, on the Cerberus NPL portfolio you purchased from Cerberus. I'm wondering, if there are some differences between portfolios that you purchased on the primary or on the secondary markets. If there are differences in terms of IRR, onboarding period, the purchase prices, cash to cash or any other elements. And if you could provide some additional details on the transaction on these aspects. The second question is on the one-off provision you posted in this quarter. If you can elaborate a little bit more on the EUR 8 million write-off on the NPL division and the EUR 5 million provision in commercial banking in the quarter.
Do you expect further one-off provisions on your portfolios? Just a clarification on the guidance on the cost of risk or the loan loss provision in full year 2021. Can you confirm the provision guidance of EUR 80 million you gave last August? Again, on provision, could you remind us how many macro overlay provision you accounted for in 2020 for the update of the macro scenario? Are there any chances that you may write back these provisions anytime soon? On the moratoria, what default rate or losses do you expect from your loans under moratoria? On cost, excluding the potential one-off costs related to last full year, do you expect some seasonalities on cost in the fourth quarter of this year?
On capital, one of your competitors have reported some additional impact from the new Definition of Default following a clarification published by the regulator at the end of August or October. Do you expect to have any additional impact from the new Definition of Default? Last question on the remaining PPA, there are EUR 37 million. When do you expect the reversal of this remaining PPA? Thank you.
Thank you very much, Manuela. Okay. In terms of the portfolio that was acquired. Well, actually, I've noticed in the short time I was here that actually most of these transactions, especially the large ones, have peculiarities, right? There is not really a single type of transaction that you would expect, and this one being slightly different for one reason or another. Mostly, I think when you get to larger transactions, in many cases you run into a mix of types of assets. It got even in certain situations to a point where we had to build consortia, right? Because we might not feel that we're the best guys, for instance, to manage mid-corporate secured loans, right? For...
with certain partners that we involve in this, with which, with whom we participated in bids where we had these types of phenomena, right? What I see is that, you know, most portfolios have their own characteristics, right? This is not atypical or strange. What it is, it's a portfolio that is quite homogeneous in terms of the type of credit. We don't have that issue that I mentioned before, right? That we needed other partners to manage it together with us or that we have, you know, significant chunks of secured debt of corporate or that we have that type of situation.
It's a small ticket size consumer credit and small retail portfolio that's really very much in line with what we like. That connects to the pricing question that Christian just did, and then where I answered that, you know, we feel very comfortable with this portfolio. Onboarding, you asked. It will be done in Q1 and Q2, 2022. Mostly Q1 with a bit of a tail in Q2, if I remember correctly. But in any case, in the first half of 2022, we'll have it onboarded. One-offs credit, so we have EUR 8 million in the NPL portfolio, EUR 5 million concentration risk. I'll start with the concentration risk.
The concentration risk is something we put there in order to be ready in case we run into issues on a small and actually, you know, rather fragmented structured finance portfolio that we have, right? Concentration risk is a generic term. It has an advantage that you know you don't need to see the issue in order to make the reservation, right, in order to make the provision. It's very much a potential risk. The reason why we chose this is that having today, objectively, no signals of flows of defaults, right? We don't have concrete evidences of places where, you know, we might justify additional provisions on a single file basis. Why use concentration risk? You saw that we used it twice. We used it in Q1 and in Q3, is because it's generic, right?
It can prepare us for whatever may happen in Q1, Q2, 2022 as the COVID measures that we discussed cease to exist. The NPL bit, EUR 8 million. It's a file by file exercise, or portfolio by portfolio, I should say, where we start to question what may be long-term impact of what we saw in terms of what we saw from COVID. Long-term impact meaning unemployment in certain places and slightly longer collection times due to the delay that was created in the courts and due to maybe slightly less availability of the debtors' cash to repay, right? In the context of an economy which took a hit. Once again, it is.
Thirdly, sorry, third element, making sure that the curves, the models on which the single files are placed, right, are still actual. There are various models with various curves. There are criteria for putting a file on one curve or another curve, and it's a check also. The last element is a check on the criteria that were used for that. Once again, it's actively looking for places in which you can today, you know, put in place safeties because, you know, the next few years we don't want to underestimate whatever the long-term impact may be. Third question, guidance, EUR 18 million provisions. We confirmed, yes. Okay? The macro overlay. Yes, there was a macro overlay. Are we going to have a writeback soon? I'd rather not rush on that.
We put these overlays in place because we wanted to be sure that, you know, when the pain of the pandemic heals after the anesthesia, right, that we got from the government doctor, right, goes away, that the pain should be tolerable, right? We're still under anesthesia because it's 2021 and some of the moratoria are still active. To talk about taking this back, these overlays, right, before the anesthesia has gone, in my opinion, would be a bit premature. Am I expecting the overlays to be necessary? It's early to say, but for what I see today, probably they were big, right? They were sizable, probably. But I wouldn't touch them for now. The Chief Risk Officer is looking at me very seriously now. I think he agrees. He certainly agrees. moratoria.
If you talk to the clients who asked for an extension of the moratoria until December 31, it's a minority, as you know. 74% restarted paying. The others are paying the interest, not the capital. They tell us, in the large majority, that they don't see acute issues in going back to paying early 2022 when it all expires, right? If I had to place a number, I said this before, I'd say about 10%, right, of the ones that we have on the moratoria today will become defaults. Okay? Cost seasonality. Well, we're not expecting anything discontinuous. We have one type of, it's not really seasonality, it's the one-off that I mentioned, right, in the scenario in which the Swiss transfer happens, right? We have another one that's a one-off.
It's a few million EUR in Q4 due to the workout of the Cerberus portfolio, which is a nice cost to have, I believe. Nothing particularly unexpected. In general, I would say, if Q4 continues to go like Q3 in terms of, you know, commercial activity, revenues and everything else, then you might also have a bit of variable costs connected to that productivity. You saw it in Q3, right, where we had some impact of the NPL business that had some variable costs that are directly connected to their activities and therefore to the revenues. If it continues, it's likely rather lively, right, activity, then I think we can expect a little bit of variable costs to be present. Nothing unexpected, Manuela. New DoD impact. Okay.
DoD, let me first of all say that our bank implemented the new rules in 2021. For the most part, the impact is there. We have an exception which is loans with the public administration, or I should say advances of credit towards the public administration, right, which is probably your main interest. First of all, I'd like to say that this for us is a reasonably small business. In terms of our balance sheet, less than 5% is made up of these types of credits.
We have quite some time until it actually starts to impact, which would be at the end of Q1 2022, to do managerial actions together with the administrations that make it possible within the rules not to register the past due, right? Acquiring commitments on timing, agreeing on the ways in which the debt will be paid back. We believe we can very much reduce the impact of that effect by these managerial actions that are planned. If I add the fact that we're looking at, I wouldn't call it a marginal business, but in any case, we're not a monoliner, right? This is for us one of many and one of the smaller businesses, right?
If I add to that the work plan that we have in terms of working with the debtors, I think in the end we can say credibly that it's not going to be material, the impact for us. PPA, you mentioned there are 37 remaining, correct. In 2021, we benefited from EUR 25 million. We expect in 2022 to have less than EUR 10 million, so we're planning on that, right? Not particularly worried about it. As you saw, until now we have had the ability to substitute PPA with industrial revenues, and we publish it quite explicitly. So that's what's left. I believe I answered all of them.
Yes. Thank you very much.
Thank you, Manuela.
The next question is from Andrea Lisi of Equita. Please go ahead.
Hi. Thank you for taking my question. Sorry, but I also have like a long list of questions. The first one is on your NBI guidance. I just wanted to understand which margin of prudence have you kept when giving your business guidance, giving the nine-month results and considering the upper end of the guidance, the fourth quarter was then kind of EUR 15 million-EUR 16 million below the third quarter, with the fourth quarter typically being the strongest quarter of the year. If you can elaborate a bit more on that. The second question is on the TLTRO contribution in the quarter. That was EUR 10 million, but as you said, it was a kind of one-off.
If you can tell us if the contribution of Tier Zero is reasonable to observe normalized in the next quarters. Another question is on the NPL cash collection. In particular, it continues to be really strong. Want to understand if you are confident about the sustainability of this cash collection in the coming quarters and years. A question on the factoring and leasing business. What do you expect in terms of volume evolution and also margins in light also of the current economic growth? A question on the recently acquired portfolio of NPLs. Is this portfolio somewhere impacted by calendar provisioning?
In general, what do you expect in terms of impact of calendar provisioning going on, and meaning that you will have an outbreak a bit more on that on the plan, but if you can anticipate on that, in particular, on the evolution of profitability on the NPL on the NPL business. Another question is, if you can provide us some indication on the intent for this year, but you have already said that you will commit with the 40%-50% payout, so imagine that it will be that level. Last one is on capital headwinds. Do you expect some headwinds on capital for next years, like, I don't know, EBA guidance or other forms on. Thank you.
Thank you, Andrea. I'm gonna refer two of these questions to Martino, who's right next to me, who's getting organized to answer you in a very concise way. Let me take the first one. Guidance. I'm not sure whether your question was my prudence on Q3 or on Q4.
On Q4.
I'll answer them both. It was a fair question also on Q3. We'll go to Q4. Well, as a style, let's put it like this. I would rather, you know, be remembered for prudence than for excessive, how should I say, optimism. Okay? We think that the Q4 guidance is reasonable. Keep in mind you have the extra negatives, right, connected to the Switzerland transaction, right? And they are significantly in excess of EUR 10 million. Okay? I would say there is an expectation to be comfortable in achieving the mid-range that we gave, right? And we wouldn't go further, right? That's it.
I understand where you come from given Q3 and how it went. Please, you know, give us a little bit of a break in terms of, you know, the difficulty of committing to forward-looking numbers in an environment like we have now, right? Because in hindsight, it all seems natural that the vaccination campaign goes so well, that economic activity picks up in this country so nicely. As we are talking, in certain countries in Northern Europe, they are reinstating lockdown measures, and that's Europe. Okay? You know, in hindsight it all seems obvious. When you look forward and you have to take responsibility for these things, it's not so obvious, right?
In Q3, we weren't expecting the type of acceleration, right, that the whole country had and that our bank greatly benefited from also in terms of, you know, proactivity and dynamism, that was ours. That wasn't macro. That was specific to us. It wasn't so obvious to expect that, to the extent that I could promise it. Okay? Q4 is a reasonable guidance. It's not undershooting. The sustainability of cash collection, I'll give the two for Martino give them at the end, right? The sustainability of cash collection.
Actually, we are very pleased with the way the NPL business is performing, because what we see is a lot of sustainability, not only in purchases of portfolios at conditions in which we want to buy. I remind you that we are now rather pleased because we made a big transaction, and we did the full year, right, volumes a few months before the end of the year. We spent quite a few months this year with a purchase volume that was behind. The reason it was behind is that we had price discipline. Sustainability of cash collection is very much connected to the way in which you buy, right? You have to buy at the right price because you live with the consequences for years.
We are both pleased with the ability that we have to price and to buy at the right conditions and with the value that we are seeing in the existing portfolios. We're just starting a whole project of re-examination of the EUR 20 billion that we have roughly in terms of possibilities to extract further value, and the initial signs there are quite encouraging. I'm very comfortable with the sustainability of the collections that you saw. In the three-year plan, I think the NPL business can give us some very nice satisfactions. Factoring and leasing. Volumes and margins, the two things are connected. In our way of doing business, margins come before volumes. That's always been the way in which the company was managed.
I think and I deeply respect the tradition, and I wouldn't want to change it. We go to business where there are margins and where capital is remunerated. What to expect? Expect us to defend the margins, which are quite high compared to traditional banks, as you know. Expect us to still give some moderate growth on the basis of additional distribution capacity, digital distribution and partnerships. In the context of economic acceleration that we saw, that's going to be a moderate to dynamic growth path. Dividend, yeah. We're looking at 40%-50%. That's historically what was done. Where I have to be a little bit prudent there, because as you know, the regulators have entered this subject rather, you know, seriously.
For some time, dividends were, you know, severely discouraged, and for some time they were managed in terms of the intensity, right? I think we'll go back to a situation in which banks can, I wouldn't say decide autonomously, because the regulators have stated that they will continue to watch this thing on a case-by-case basis. You know, given our profitability, given our capital levels, given our risk profile, in my opinion, a 40%-50% payout policy is entirely defendable. That would be our story. Capital headwinds, not really. Some capital tailwinds that we discussed, in terms of the risk weighting of the NPLs.
If it's too early to be specific, but there could be some projects in our shop to do some optimizations, outside of the Switzerland scenario, right? Which we think could give us some additional benefits. I'm not expecting a particular headwind. In fact, you know, we will see if we can, separately from Switzerland, right, if we can organize some things that will give us some more space. I have two questions that I didn't touch. I leave them to Martino. One is the TLTRO, and the other one was the calendar provisioning question.
Regarding the portfolio of treasuries. No, it is out of calendar provisioning. We don't have credit subject to calendar provisioning. Regarding TLTRO, let's say TLTRO consists of two components. One is, let's say, an attractive cost of funding, which is of course we benefit each quarter. Then, there is calculated a special reference period that for this booking this EUR 10 million which we are speaking, starts from first March 2020 and thirty-first March 2021. We reach the threshold for the, for this, let's say for an additional -0.5% reduction in the cost of funding. When this was communicated to us in September, then we booked afterwards.
Coming back, yes, if we achieve loans target, growth target in 2022, probably we will have a similar effect. As this one is the minus 0.5% relating to the achievement of lending threshold for period first March 2020, thirty-first March 2021. Every bank, I know that many banks book this in different ways. We book in this way.
Thank you.
I opened this here. Wait for next year if we achieve the target. Next year in
So-
2022.
Just to be clear, in next year if you achieve the target of lending, is it reasonable to see something that impacts just in one quarter, so kind of one-off, or should it be split in the four quarters?
No, no. The same.
Same.
The same. It's a question of style. Different banks have different approaches to it. We like to show you the revenues when we're sure, right? Given that there are lending thresholds, okay, when we reach the lending thresholds, when it's all certain, when we cash it's when we show it.
Exactly. When we receive the communication from the authority.
This communication came in Q. I think also the actual cash came in Q3. That's when we showed it.
Okay, thank you. Just sorry, a follow-up on the profitability aspect in entire business, when calendar provisioning will be-
Yeah.
This one, you know, it would be part of the plan. There will be mitigation action we are going to put in place. The first one would be for sure, giving more time to extrajudicial activity, sale and leaseback, and find all the possible way to, let's say, anticipate the cash collection. The second can be, for example, even buy portfolios, then work out the portfolio, and then we sell the portfolio afterwards. The third can be find co-investors and find some co-investors where we acquire portfolio together, thereby can we perform in servicing, thereby limiting the potential impact of calendar provisioning. In other words, the impact will start on 2024, probably after the end of the plan, and we're able to mitigate the impact with management actions.
Thank you very much. The next question is from Simonetta Chiriotti of Mediobanca. Please go ahead. Ms. Chiriotti, your line is open. Is your telephone on mute, sir? Your line is open.
Hello, can you hear me?
Now we can, Simonetta. Yes.
Okay, sorry. Just a couple of questions from my side. The first is on the NPL business. You reached the target with this large deal on the secondary market. I know that it's meaningless to speak about what is better if it is better buying on the primary or the secondary market, because it will depend on the price. The question is different. Is the market changing? Do you expect to go on with the secondary market? What's happening on the primary market? What's happening to originators? Do you have competitors bidding for portfolios more on the secondary than on the primary market? If you can give us a sense of the changes that are characterizing the market and the impact for your business.
The second question is on toward the factoring business, SMEs business. Volumes have been sustained by these new niches that apparently are very profitable, looking at your results. What is happening to your traditional factoring business in terms of volumes and margins? Is there appetite from your traditional customer base, the churn rate? The basically KPIs of the business, how are they evolving? Thank you.
Good. Yeah, very clear. On the NPL business, let me give you some broad statements, right? Because it's obviously difficult to make predictions. Is the market changing? Well, what we noticed, we mentioned it also in the NPL meeting, we mentioned it in our report, the NPL Market Watch. We never really believed in a huge flow of NPLs coming onto the market, swamping the few acquirers, right? Therefore everything becoming a buyer's market, basically. In fact, we see reasonable offer and quite some competition, right? Let me first say that this is a market where there is apparently capital, also foreign capital, looking for transactions, and there are players that have capabilities and that allow this capital to bid.
We, without question, out of prudence also, in terms of outlook, are assuming prices to gradually increase, both because the quality of the portfolios that are being sold will improve. Younger, fresher portfolios inherently are worth more and therefore go at higher prices, both because there's some competition. This huge cleanup phase of certain large banks, right, is behind us. There are of course single specific individual situations which may contribute some volumes. We expect quite a thoughtful strategy from the banks, from the primary market, right? Being able to organize the portfolios in a way that maximizes the result and generates some competition, right? That maximize a little bit of the competition right around us. We expect, in this context, the secondary market to provide some growth.
We made a rough estimate, you can find it in the report, right? That around 20%-25% of the market would be secondary market, right? I don't remember if it was 20 or 25, to be honest. I believe 25 would be secondary market right?. That's also happening because, as you've seen, probably, there are quite a few DAX portfolios which are underperforming. There, you know, you can have different strategies. In some cases, it may be worthwhile for these portfolios to be, you know, maybe, you know, partly sold in order to accelerate some cash realization. That's going to be a driver, right? I would say, competition on the increase. Secondary market adding opportunities.
Our selectivity and competence in a very specific area where it's a little bit more difficult to create competence because it's all very industrial. It's IT systems, it's sophistication of modeling, it's operations, right? Our competence in that respect, shielding us from too much of a deterioration of the economics. The assumptions that we're putting in the plan that we're writing, right, are assumptions in which we anticipate conditions to become slightly tougher, and we compensate those with operational performance that we can improve, right? That's quite an active approach also in terms of what spaces we have for further improvement. Processes, systems, strategies, use of technology, use of robotics, costs of recovery, not just effective, effectiveness of recovery, right? Second question. Factoring SME. Yeah.
We have a Superbonus stock that we built up, right, between March and September in excess, significantly in excess of EUR 200 million, going up to EUR 250 million. Factoring is seasonality, right? Very slight contraction between second Q and fourth Q. If you read through the seasonality, what we see is month by month an increase in activity, both because we activate accounts and accept new debtors, right, expand the business, penetrate the client a bit more, and because of the economic acceleration that we witness in the market. I think there is a. If you take out the seasonality per se, which is really typical, it's been there for years, right? You see a sort of a ground swell of our numbers that is increasing month by month and developing nicely.
On top of which we've built the Superbonus business. You know, this year it's a Superbonus, next year it's gonna be something else, right? The point is not, right, the importance of the Superbonus for the bank, because it's just an opportunity we took it. The way it came, it might go away, right? The point is this organization capable more than ours, I would say, to capture opportunities and be, you know, ready for the next Superbonus. On that, we wanted to, you know, put a little bit of emphasis because we think it's typical of us, and we think it sets us apart a little bit from, you know, a traditional universal bank, where things tend to be a little bit more gradual. Okay? I hope I answered your question.
Absolutely, yes. Thank you.
Thank you, Simonetta.
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.
Great. Well, thank you all very much. Thanks for your trust and your time. We're available, of course, Martina and myself, should there be any need for additional clarification through the normal channels. I wish you all a very good afternoon and evening, and thanks for your time and patience with us today. Good afternoon.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.