Ladies and gentlemen, the conference will begin shortly. Please hold the line. Thank you for your patience. Please hold the line. The conference will begin shortly. Thank you. Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca IFIS Third Quarter 2025 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Frederik Geertman, Chief Executive Officer of Banca IFIS. Please go ahead, sir.
Good morning, everybody, and welcome to our nine-month 2025 results call. Today is a special call because, for the first time, we are including in the results of the group the results of the bank that we acquired, of Illimity Bank that was bought at the start of this year. The presentation is slightly different and slightly richer than the one you are used to. I will try to focus as much as possible on things that are new and that maybe require a bit of explanation. As usual, we will keep some time at the end of the call to answer your questions in case you have them. Let me go straight into the executive summary. I will take you to page four, Third Quarter 2025 Group Results. We report a net income of EUR 385 million in the quarter, reflecting two things.
Obviously, the resilient profitability of Banca IFIS standalone and the first effect, right, of a limited consolidation, meaning badwill and non-recurring expenditures. Standalone, we confirm our profitability, which remains robust. We are on track to achieve our guidance, which was roughly EUR 160 million on a standalone basis for the year. Now, that obviously does not include the extraordinary costs relative to the acquisition of Illimity. In the third quarter, we have the usual seasonality, which we will take a look at later. As usual, we expect the fourth quarter to accelerate a bit in the recurring normal business. Funding, we have a rather benign spread environment at the moment for the Republic of Italy in general, but that also reflects, obviously, on banks. We have a very sizable cash buffer of over EUR 3 billion, including counterbalancing capacity.
We think we are in a very strong position to address the funding costs in the next couple of quarters, starting now, as we can substitute this funding with funding that has lower rates. We post a CET1 ratio of 14.25% on the 30th of September, including the net income and after deducting the dividends accrued in the nine months. That does not include, obviously, the disposal of the non-core stake in Hype, which will bring a positive impact further on, but is not included in the 14.25%. We confirm a EUR 1.2 interim dividend per share, EUR 1.2 interim dividend per share. Happy to report that. It is very important for us to have a good and attractive dividend policy. In this quarter, which is the first quarter in which we integrate Illimity, we can reconfirm EUR 1.2 per share and the 14.25% CET1 ratio.
These are numbers that make us confident looking forward. Page five, update on Illimity. In the third quarter, Illimity reported a loss of EUR 22 million. If we exclude non-recurring items that are connected to the integration, it was minus 11. That is also their seasonality, and that is also the start of the restructuring process that obviously will require a few quarters. We expect the bank to return to profitability during 2026, but obviously, we also have a merger planned. I think it would be probably efficient for the analysts to think about this whole group on a combined basis, right? We wanted to give you this sort of feeling on the Illimity standalone. Due diligence is ongoing. It is going as planned. Time-wise, we are confident that we will complete it in the fourth quarter, as requested by the ECB.
We note that, obviously, Illimity in the end of 2024 booked in March and in Q2 booked in July, already booked quite a significant amount of losses. So we have EUR 300 million to build on, meaning that the due diligence might give us some further impact, but we need to keep in mind that a significant amount of adjustment was already made. EUR 110 million integration cost that we estimated in the offer period on January 8, we confirm it. We think it is a reasonable amount, also looking into the actual job that needs to be done. We have already booked 16 of those, and we will book the remaining amount in the fourth quarter of 2025. We have started the strategic review of Illimity's non-core assets.
You may recall that also in the call in which we launched the offer on January 8th, we had made some comments about expecting to rationalize the group a bit in case the offer was successful. That assessment is now ongoing. We keep analyzing these assets with a view on their potential for long-term value creation and how much investment would be required in terms of CapEx and human resources to develop them. As part of this process, we accepted an offer for the non-core stake in Hype from Banca Sella for EUR 85 million. Page six, what was done and what needs to be done in our journey to capture the value from the integration. On the left, the actions taken. I will be very brief here. On the right, what we expect to do.
The meaning of the slide is there's a lot of work, but things are going on plan, and we are really encouraged by the timeline and the speed at which the teams are addressing the issues. Change of control done, obviously. Offer settled, 100% of the shares. Appointment of the new Board of Director, Chairman, and CEO done. Appointment of partial renewal of the management team in Illimity done. Due diligence on all Illimity assets initiated and assessments of non-core assets initiated. That's obviously ongoing. On finance, we have a combined funding strategy for the combined entity, and we have the integration of the proprietary portfolio that's done. We have finance now absolutely centralized, and we are managing funding and investments in a centralized way. Commercial banking and NPL are looking at the assets, obviously, line by line, working with the teams.
Good atmosphere, I would say, in terms of the will and the skill of the people of Illimity we found and their contribution also prospectively to the combined entity. Some initial cross-selling strategy is now being deployed in commercial banking. On NPL, we're looking at the portfolios and also looking at strategic considerations. Non-core asset disposal actions. As expected, we started to look at all the assets. We're taking a long-term view, and we received an offer for the 50% stake in Hype that I will get into later in the context of shareholder agreements that were already in place, and we accepted that offer. Next steps, fourth quarter completion of the due diligence, defining a commercial and retail combined entity product offer, integration strategy for the NPL business, IT migration roadmap high level.
That would need, obviously, also the redefinition of certain agreements that were taken by Illimity in the last years and harmonization of the credit policy. In the first half of 2026, then, we will define the combined entity target operating model, organizational structure, integrate the internal control frameworks. At that point, also, I think we'll have a more definitive look at the future perimeter of the group, meaning that if there will be further potential assets disposals, we will have a clearer picture on what the perimeter then is. That would make it possible in the second half of 2026, early in the second half of 2026, I would say, to present the business plan that has stable perimeters, stable perspective on how the group will develop, a clear picture on the IT integration.
That will lead us then, within 2026, to merge Illimity to Banca IFIS, which is currently something we can confirm. Page seven, we give some details about the third quarter, showing you separately consolidated numbers, IFIS numbers, and Illimity numbers. I will not take you through the whole slide. It was meant as an extra analytical support tool for the analysts. Let me just say the consolidated net income of EUR 385 million obviously reflects EUR 400 million badwill. It reflects EUR 13 million extraordinary costs related to the tender offer, booked in non-recurring items, and EUR 16 million integration costs. That is part of the EUR 110 of those 16 already incurred. Third quarter 2025 revenues reflect the usual seasonality. We expect it to accelerate in the fourth quarter. It is already happening, actually, in October.
In the fourth quarter, obviously, expect to see the effect of the due diligence and the booking of the remaining integration costs. That is something you need to keep in mind for Q4. Funding, page eight, we wanted to give a little bit of attention to this important strategic aspect. You will remember that some of you asked us about what the value of the funding benefit could be, right, in the integration. We thought it was difficult to ascertain that outside in, so we did not take a position. It is now becoming a bit easier for us to have a view. Also, the external environment has developed rather positively. I mean the spread of the Bank of Italy and, in general, the funding environment for entities like ours. On the back of that, we wanted to show you the maturities of our group funding.
There's a lot of retail, but also some bonds. So bonds, as you can see, it's EUR 2.7 billion retail and about EUR 700 million-EUR 800 million bonds. We're addressing that in an integrated way. To give you an idea, we knew we had EUR 300 million Illimity bonds expiring in December. The CFO decided to front-load that opportunity and to issue in July. We issued a coupon of 3.625%. The bond that expires has a coupon of 6.625%. It gives you the saving on that bond. Of course, it's only EUR 300 million. It doesn't apply to everything, but it is an opportunity. In the next quarters, expect us to be really, really focused on that in order to assist in the top line a bit because these are obviously interest expenses that go into the net interest margin. Capital ratios, page nine. We end up at 14.25%. We start from 16.52%.
Obviously, that was standalone. We had a very comfortable CET1 ratio that made it possible to think about this acquisition. What are the moving parts? We have the contribution of net income after deducting dividends. We have a capital increase. We have some calendar provisioning, intangible assets, and goodwill that we need to deduct. We have the risk-weighted asset increase, obviously, from the acquisition itself, right? That is the big number that obviously impacts, but that was taken into account. We land at 14.25%, including the nine-month net income net of dividends, so also net of the full year foreseeable dividend not paid out yet, okay? I will take you to page 10, asset quality ratios. Gross asset quality ratio 4.7%, net asset quality ratio 2.7%. We give you detail on the combined numbers. Obviously, the acquisition impacted those numbers.
You're having a bit of a methodology change, if you will, from the previous quarters. Therefore, just to be clear on what is assumed here and what is included in the ratio, we exclude the following things. We exclude GOVIS that are at amortized cost, that are EUR 2.6 billion of net book value. We exclude the NPL business. We exclude the acquired non-performing entities, so as part of the business of the bank, so turnaround financing or entities from Illimity's core business. They are listed here. So EUR 0.1 billion built-in, EUR 0.3 billion turnaround, EUR 0.1 billion structured finance because these were purchased, right? We maintain this approach stable, right? We exclude the notes with the claims business, the procurement dispute business, I think, is actually, I know it refers to the claims business that Illimity bought into and the NPL business portfolio.
These things are not included in the MPE ratio. We had to make choices, of course, and we thought that this was the more consistent way to show you performance over time, right? Not including MPEs that are purchased in different shapes or forms. Page 11, the Hype disposal. A bit of context. In June 2023, Illimity and Banca Sella entered into a shareholder agreement governing their holdings in Hype. In February 2025, a deadlock arose in the board of Hype under Illimity's previous management following the negative vote cast by the directors appointed by Illimity on the approval of the budget. That deadlock continued.
Now, the shareholders' agreement that's enforced provides a deadlock resolution mechanism whereby, in this case, either shareholder can initiate a sale or purchase process by notifying the other with an offer and a fairness opinion issued by one of a number of specific independent advisors that were named in the shareholder agreement. Upon receipt of this fairness opinion, the receiver, the addressee, can either buy the notifying shareholder stake or sell the stake at that price, at the price stated in the offer and the fairness opinion. Now, Banca Sella holding notified Illimity with a fairness opinion issued by UBS and indicated fair value for the 50% stake at EUR 85 million and produced a further fairness opinion issued by PwC. Illimity requested Lazard to execute its own fairness opinion for its board, which confirmed the fairness of the price offered by Banca Sella.
At that point, considering the non-core asset optimization strategy, Illimity agreed to sell its stake to Banca Sella for EUR 85 million, not purchase it, of course, but sell it, implying a potential capital gain of EUR 4 million and an estimated 55 basis points CT1 benefit, which is obviously in the grander strategy of the group, in the broader strategy of the group, a very, very welcome and necessary contribution. I'll very briefly go into Banca IFIS standalone. I'll try to do this in a few minutes given the change and all the novelty that we've discussed in the call today. Net revenues in the third quarter at EUR 139 million. Commercial banking revenues at EUR 84 million, impacted by its seasonality as well as by the base rate effect. You do not see the base rate effect Q on Q, but you see it year- on- year. NPL revenues, EUR 54 million.
They were EUR 55 million in the third quarter of 2024. Very seasonal, as you know. You have seen that every year in the third quarter in the last four or five years. Does not include capital gains on the disposal of NPL portfolio sales that we did do, as usual. Non-core and GNS at EUR 1 million. It was EUR 9 million in the third quarter of 2024. Q on Q decreases due to lower trading gains in dividends. Year- on- year, decrease incorporates the base rate effect, right? Fourth quarter revenues expected to benefit from the usual positive end-of-year seasonality. In NPL and structured finance, we always say that they provide a stable contribution on an annual basis, but some quarterly seasonality. This quarter, we did not get a lot of impact from the structured finance part. Commercial activity, factoring turnover, leasing, equipment and technology, and automotive all going nicely.
We have year-on-year increases that look good. Positive environment. As we mentioned always, both in factoring and in leasing, we are driven by price and risk. It is margin protection here. It would be feasible to present larger numbers, but not at the current levels of price and risk discipline that we have maintained in the past years and that we will continue to maintain. NPL portfolio, page 15. Another EUR 94 million of quarterly cash collection. Very stable number. It gives us a lot of confidence in the portfolios. Revenues from judicial and extrajudicial activity at EUR 61 million. In third quarter 2024, it was EUR 53 million. It was a reasonable quarter for the NPL, even though it was the third quarter. The team, in our opinion, is working very well in that division.
There were also lots of industrial projects going on there, specifically related to the purchasing of very fresh portfolios and some forward flow agreements. Good numbers in Q3, even considering, obviously, seasonality. Page 16, a little bit of detail on the interest income. We started showing you this analysis a few quarters ago in order to give you a view on the size of the margin compression, the overall margin compression, and the evolution of the overall margin compression. Now you see that between the second and the third quarter, the overall margin between what we pay and what we get on the interest side has stabilized. We are now solid at 1.6. Base rate was stable. Aggregate interest income slightly down. Aggregate cost of funding slightly down.
Net effect stable, meaning that if, as we believe, in the coming quarters, the cost of funding can be reduced, then given that we do not have the negative impact of the base rates on the revenue side, on the loan side, on the asset side, right, we hope to see a return to widening of this overall spread. If that is true, we will have managed, in the end, a very, very strong rate swing of the last years in a fairly stabilized way. Page 17, costs. Quarter on quarter, other operating costs of EUR 5 million. Marketing and IT, that is just when we start projects or when we activate the spend. I would not look into it too much. EUR 1.6 million of lower costs offset related to leasing. Those are in Italian altri provinti. Minus EUR 8 million on the NPL recovery side. Judicial work-out seasonality.
Cost of personnel, EUR 2 million. That's variable compensation timing. Not a lot of other things to report except the non-recurring items at the bottom. We've already discussed it, and I wouldn't go into it. Page 18, we always get this question. I wouldn't explain the ratios. You know them, the numbers. We're still not seeing widespread macro credit risk materializing. That's true for the payment days. It's true for the probability of default. It's true for rating migrations. We only have some anecdotal evidence. It is true that the GDP in the country is not progressing very quickly. We have 0.something % growth. Industrial production has contracted in the last years. Apparently, there's still a lot of liquidity around in the corporates of the country. The health of the overall Italian SME segment seems to be quite resilient, quite stable.
Therefore, we can only report what we showed you here. We have some anecdotal things, obviously. In some sectors, some players fold, but no widespread credit issues. I would not present page 19 and instead stop here. As always, there are lots of appendices. If you are curious about specific issues, we give you a lot of details there. Roberto Ferrari, the CFO, is here with me to answer questions, as well as Martino Da Rio, sorry, and our investor relator. I would now hand over to you for any questions you might have. As said at the beginning, it is a big project, the integration of Illimity. We are still in an ongoing assessment, but we are encouraged by what we have seen so far. We will give you the conclusion of all those assessments after Q4.
In the next earnings call, I think we'll have a lot more to share. I hand over the question to the questions.
Thank you, sir. This is a Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question is from Lorenzo Giacometti of Intermonte.
Yes, good morning, and thank you for taking my questions. Thank you also for the presentation and especially for the slides of Illimity because I think they're very useful for those who, like me, were not familiar with the bank. Okay, the first question is on the settlement ratio. What level of settlement ratio do you expect at year-end 2025?
The second is if you can provide an update on Illimity's due diligence and especially what amount of write-off do you expect as a result of the said due diligence. If you expect further disposals in addition to the Hype stake. The last one is if you expect some managerial action in addition to the potential disposals in order to reduce the risk-weighted assets. If yes, which ones? Thank you.
Yeah, thank you, Lorenzo. Those are relevant questions. I see to what extent I can answer, but I definitely understand your line of questions. On CET1 ratio target or expectations, right, for year-end. The thing is we have moving parts, right? We need to be a little bit careful because, for instance, the due diligence hasn't yet been completed and we don't have the numbers that come out of there.
Let me say this though. We expect to maintain a level of around 14% after the integration. That was always our target, and we think it is an adequate level to run our bank in the businesses that it is in on the safe side. It may happen that in certain quarters we could go slightly below that number, but not to an extent that it would question the overall target that I have just given you, right? Do not imagine it as a definitive hard floor because we would not be able today to give you a guarantee, right, in that sense. But we reaffirm that we want to be around 14% and that we may occasionally go a bit below it. Fourth quarter 2025, some things come in. The restructuring cost, EUR 95 million, and the due diligence, right?
On that basis, I do not want to make any more firm predictions of exactly where we are going to end up, but keep in mind what we just said, right? We reconfirmed the target of around 14%. We will always maintain a good and solid buffer compared to the 9.9% requirement that we have, right, including the 1% of pillar two guidance. On due diligence, I already mentioned that it is going smoothly in terms of time, right? I am not saying in terms of results, but in terms of project. It is going smoothly. It can be concluded in December 2025. It can be concluded with the full and very wide analysis that was requested. I want you to please consider that the bank has made roughly EUR 290.3 million provisions already in the last nine months. That is work that is already done, right?
We are not expecting anything even remotely close to that type of number, right? Obviously, I do not want to give specific numbers before the due diligence is over. We will book them in Q4 2024, so you will have a definitive answer in the next earnings call. Expect further disposals. We have a strategic review ongoing. We are taking, as mentioned, a view on long-term value creation, but also on investments that are required to make a success out of a business, right? You need to think about both. If you have an activity and you wish to keep and develop it, what is that going to mean in terms of management time, in terms of HR, and in terms of investments? On that basis, we are evaluating certain parts of the group.
In this context, we received the offer on Hype, which was beneficial for us also in terms of 55 basis points. We're not going to rush, as I've mentioned before, into forced sales of assets though, right? I want to say this very clearly. We don't have an urgent need to boost financials with short-term results, and we stay on that logic. In case we see there are assets that don't make a lot of sense, we will be quick and we won't hesitate. We are methodical, we are quick, but we won't be rushed or forced. That's the approach. Capital optimization and then levers to improve the CapEx, the CET1, sorry. Yeah, there's a slightly wider approach to CET1.
We're considering, obviously, everything we can do, first of all, to mitigate and manage risks because at the end of the day, the CT1 ratio is an expression, right, also of that. Your risk-weighted assets are an expression of risk. We are working on risk-weighted asset reduction, but this risk-return assessment on assets, certain portfolios, etc., of concentration risks, of legal risks, that's something we are doing very broadly on the whole perimeter that we acquired. We're also looking at, for instance, potential credit insurance against some large exposures. Imagine there's a very wide range of actions you can take to mitigate risks. We're looking at those in terms of feasibility and opportunity cost also, right? At the end of the day, our job is to take risks and be well remunerated for it, right? Not every risk-reduction measure makes sense.
Also here, we're moving methodically, not wasting time, and we will be concrete in the next quarters. There is no particular rush. I hope, Lorenzo, what I could say answered at least partially your questions, although I realize you might have wanted a number that I can't yet give.
Okay, it's all very clear. Thank you.
The next question is from Irene Rossetto of Banca Across.
Yes, hello to everyone. Thanks for taking my questions. A couple of questions from my side. You have confirmed the interim dividend, same level of the year before. Should we expect the same level of final dividend in May 2026? Can you elaborate a bit more on the methodology change to calculate the asset quality ratio and why you took this decision? Thank you.
Thank you, Irene. Yeah. On the dividends, first of all, dividends are important.
They are a very important part of the equity story of the last few years of the bank. We are committed to maintaining an attractive dividend policy that will support the bank's long-term growth, of course, and will ensure a solid capital profile, but it needs to be attractive for the investors. You can see in the EUR 1.2 per share, you can see that reflected, right? The bank did not confirm the dividend in absolute numbers as last year. It confirmed the dividend per share as last year on the interim basis, right? You can see the commitment to maintaining an attractive dividend policy. You can see it in that decision.
Now, the final dividends for 2025 will depend on operational results of Banca IFIS and Illimity, but it will also depend on the results of the due diligence, right, and on the evolution of the macro environment. I can't give you the confirmation that the remaining part of the dividend will be the same as last year, but I can give you the confirmation that the bank is committed to maintaining an attractive dividend policy. In that context, the interim dividend was set on a per-share basis at the same level as last year. That is, I think, as far as it's possible to go now. In terms of NPE ratios, yes, I understand the question. We had to take a decision on how to show you the bank in its most readable way, also over time, right?
We decided to not to put in stuff that we consider extraordinary, i.e., stuff that's related to the NPE business of Illimity that has various shapes and sizes. It has structures, it has notes, it has funds, things related to, in general, NPEs that are bought. We had to make a decision on what we consider, A, consistent with how we reasoned about this in the past. Purchased NPEs generally do not concur to the, are not incorporated in the ratio. Secondly, that would give you a view over time, right, also of how this portfolio of Illimity will perform in terms of flows to default. What we decided to exclude were government bonds at amortized cost. That is not news.
Our NPL business, meaning Banca IFIS's NPL business, acquired non-performing exposures that were part of the business of Illimity, but that for us, we took the position that we acquired them knowing we were acquiring it, right? Obviously, the transaction was done at a certain price reflecting this. We excluded notes with the underlying claims, right, and the NPL business portfolios. Under this methodology, starting from the 30th of September, if we have exposures in commercial banking, further exposures in commercial banking that will deteriorate, you will see it in the NPE ratio. You will be able to see how the portfolios develop over time. The starting point, we think, was the best representation in order to give you a meaningful number. I hope I answered your question, especially in the forward-looking part.
Thank you very much.
The next question, sir, is from Manuela Meroni of Intesa Sanpaolo.
Good morning, and thanks for the presentation and the detailed information regarding Illimity. I have four questions. The first one is on the one-offs. Could you detail the components driving the change in the badwill from EUR 440 million in June 2025 to EUR 400 million in September? Could you also clarify what the EUR 60 million of integration costs recognized in the quarter relate to? The second question is on 2026. Could you provide guidance on the expected net income for the year and when we should expect the presentation of the business plan? You mentioned the second half, you are thinking about year-end or earlier. The third question is on 2027.
Previously, you indicated a preliminary 2027 net income of EUR 250 million, comprising of EUR 160 million from Banca IFIS, EUR 40 million from Illimity, EUR 50 million synergies on cost, and EUR 25 million on revenues. Can you confirm those numbers and specifically the amount of synergies and the EUR 40 million contribution from Illimity for 2027? Finally, on dividend, could you please clarify the amount of dividend already deducted from September common equity-to-earnings ratio? Thank you.
Okay. Yeah. I'll take them in the order in which you asked. Yeah. Breakdown of the badwill, we started in the second quarter of 2025 with EUR 448 million. We booked EUR 400 million in the third quarter of 2025, so you see a reduction of EUR 48 million. That would be, I'll give you the breakdown. EUR 37 million goodwill write-offs. That's goodwill on controlled legal entities, right, on the book value of controlled legal entities.
16 million of write-offs on the integration, mostly linked to IT. Okay? You will remember that there were certain contracts in place, and we had to address them. Partially, this was addressed. There is a plus EUR 5 million of tax effects. Okay? If you add these up, you should end up with the EUR 48 million. That is the delta. 2026 income, yeah. It is November 2025, and we have a lot of moving parts, Manuela. On this one, I think I will just say that it is a bit early to give a guidance for 2026. We will present the business plan in the second half of 2026. What is important when we present that business plan is not so much the date, it is having a stable perimeter and having a solid view on how the integration goes.
If you're asking me now, I think it would be nice to do it in the beginning of the second half of 2026, but that would require that we have a little bit of progress on certain strategic decisions because we want to write the plan on the basis of a perimeter that is clear and solid and make it also easy for you people to read what's going on. On 2027, we gave an indication of a EUR 250 million target. You broke that down. You said, "Okay, this is IFIS, this would be Illimity, that would be the synergies, and I think it's a reasonable way to think about it." I would urge you, though, to think about it at a combined level. Okay? Let me, first of all, confirm our estimates on the synergies. I mentioned it in the press release as well.
We confirmed that the EUR 50 million and EUR 25 million cost and revenue synergies, respectively, pre-tax, sorry. We also confirmed the EUR 250 million target for 2027. It will be really on a combined entity level, though, meaning that certain things may be a bit more. You attribute certain profits to Illimity. Illimity in this quarter was running a slight loss, as you saw. On the other hand, there could be some sizable benefit on the funding side. You see the way we are reasoning about this is really in a combined entity way, right? On that basis, the breakdown that you gave, I understand the reasoning, but it is not the way we are calculating it. We are in a position in which we are reaffirming the EUR 250 million net profit target for 2027, and we are reaffirming the synergies.
The composition of this will be slightly different, as usual, right, when you have long-term planning, when you have long-term planning things. On the dividend, you asked what was included. I would pass the question to Roberto Ferrari, who will give you a very precise answer.
Yeah. Hi, Manuela. Thank you for asking. The total dividend that we deducted from net profit in third quarter 2025 was EUR 83 million. That is EUR 73 million dividend and EUR 10 million foreseeable dividend. Thank you.
Thank you very much.
The next question is from Giuseppe Grimaldi of BNP Paribas.
Good morning, everybody. Thanks for taking my questions and the presentation you gave us. I have actually the first one, which is related to the NII trajectory. If you could give us a bit of a sense of the evolution of that in the incoming quarters.
Linked to that, what should we expect in terms of custom funding, maybe in Q4 and as the year progresses into 2026? The latest one on DTA, is there any sort of recognition that we may expect into Q4, considering the amount of losses that Illimity booked pre-integration? Thank you.
Okay. I'll take the first one, Giuseppe, and then pass the second and the third one to Roberto. Roberto will get prepared in the meantime. On net interest income, you saw the downward trend in the last quarters, right? It is looking like it stopped now. It is really the result of the rates environment. We try to reduce, as we have shown many times, our rate sensitivity, but there are limits to, obviously, the instruments you can use. You actually also run into regulatory limits when you try to hedge those types of things.
Some exposure, we kept it. What we expect is that in 2025, the overall net interest income will be roughly down 10% versus 2024. That is, as I said, on the back also of the mitigating actions we took. Now we are looking ahead, right? We have, first of all, a very significant cash pile, so we can think about this in a serene and relaxed way. We have, as we saw, a few billions of funding expiring in the next quarters, both retail and bonds. There is an opportunity to improve the net interest income over the following quarters and years, maybe. The funding synergies that you can expect are in the tens of millions, and we think they will be impactful. I will hand over to Roberto for more clarity on this and also for the question on DTAs. Yeah.
Okay. Thank you, Frederik. Actually, yeah, it is a very benign environment for spreads, either on gold and on bank issuances. We'll remind you that the issuance that we performed in July, that was at 140 basis points spread, and the part we issued at spreads that were north of 300 basis points. Actually, I would say that in the next two years, if the situation will stay the same, we will have important synergies in terms of cost of funding. Next year, we will replace time deposits at much lower costs. Also, we are planning new issuances on the wholesale market. To give you a number, I would say that the combined entity should have a beneficial impact of something between EUR 40 million and EUR 50 million in terms of cost of funding, in terms of net interest income for 2026.
We have important issuances that will redeem in 2027, and actually, we will have also beneficial impacts in 2027. The next two years will be very important in terms of cost of funding synergies on Banca IFIS and on Illimity. It is important also to underline that the cost of funding of Illimity is around 45 basis points higher than the one of Banca IFIS. I would say that in two years' time, we should converge the cost of funding of Banca IFIS and Illimity. In terms of DTA, next year, not in the last quarter, next year, we will recover DTA from Illimity. They will be around EUR 40 million, and this will be through the merger when we will perform a probability test next year on our future or profitability. We will recover around EUR 40 million DTA, but this would be in 2026, not 2025.
I hope I have been clear in this answer. Thank you for asking.
Thanks. Very clear. Maybe just a very quick follow-up. If you can give us a bit of a sense of the cost of deposit that you are issuing these days, how that compares to the one expiring.
Yeah. The one expiring, in terms of deposit, we have an important stock of deposit that will expire between December and March, where the cost was 5%, but the average cost is between 3.5% and 4%. And the new deposit that we are issuing is at around 2.5%-2.6%. Actually, for us, we compete with government bonds, considering also the different fiscal tax. And it is very important for us the level of Italian government bonds on two years' maturity.
Now we are at around 2.10-2.20, and this means that our time deposits are very competitive when we issue at around 2.6-2.7%.
Thanks, Roberto. Very clear.
Thank you for asking.
The next question is from Davide Giuliano of Equita.
Hi. Good morning, and thank you for taking my question. I have two. The first one on the impact of the budget law in terms of extra taxation on banks. What impact do you estimate on the combined entity for the coming years, taking into account that the Illimity tax rate was lower than your theoretical tax rate? The second one on cross-selling and revenue synergies. Can you elaborate for a moment on the initiative you have activated, and when can we expect the first positive effect? Thank you.
I'll take the second one.
I will pass the one on the impact of the tax to the CFO, to the extent that it is possible for the CFO to give you a solid answer, but he will do his best, I am sure. On cross-selling, you should imagine a couple of things. First of all, there are more potential areas, but I will give you two that are concrete and that give you an idea. First of all, there is the distribution capacity of Banca IFIS. We have, as you know, 28 corporate centers or branches throughout the country. For us, it is possible to distribute Illimity specializations much more closely to the entrepreneurs in the country, right? Illimity specializations can also be in investment banking and advisory and that sort of stuff that we were slightly less large in, slightly less structured in.
Another clear example could be Banca IFIS' factoring capability that may be made usefully available to the team that does turnaround financing in Illimity, which is an area that is highly profitable, quite risky, needs to be managed carefully, but definitely a skill that we were interested to explore, and we still are interested to explore in Illimity. There you have complementarities making themselves useful to the respective entities. Now, I think what you should expect is the revenue synergies to follow the path that we set on January 8th. Half become available in 2026, they fully become available in 2027. It's not science. It's really an informed judgment, if you will. These things take time. You need people to get acquainted with each other and with the products. You need to organize the dialogue internally and with the clients around opportunities. These things come in gradually.
For now, I would say expect half of it in 2026 and full in 2027 of the revenue synergies, right? I would pass over to Roberto for your question on the tax law.
Okay. Davide. Ciao. Yeah. Actually, it is important to say that the budget law is still a proposal, so there could be important changes in the near future. I will give you the two impacts that can be important for Banca IFIS and Illimity. Actually, they are the 2% increase in IRAP taxes and the lack of deductibility on the 4% of interest expenses. We are in the region of EUR 10 million-EUR 12 million for 2026 for those two impacts. Thank you for asking, Davide.
Thank you.
The next question is from Simonetta Chiriotti of Mediobanca.
Thank you for taking my question, and good morning, all.
A question on the NPL segment on two aspects. First of all, if you could update us on how the market is evolving, which are the projects that you have, if there are some initial thoughts on the integration of the business that you have in IFIS and the business of Illimity in this specific segment. The second question on this topic is on the impact of calendar provisioning, if there is any, or if it is increasing, and what you are planning to face this trend. Thank you.
Yeah. On the NPL market, it is evolving. I think I mentioned this before. The overall NPL market in terms of transactions, you can look it up in our NPL Market Watch, which is a very nice publication the group makes on this subject. You see that the overall size of the transactions is decreasing, right?
The size of the transactions and the aggregate volume. In this overall mix, small tickets unsecured appears to be decreasing a lot less. It is not strange. Small tickets unsecured NPLs are a consequence of a business, which is consumer credit and retail banking, which in our country is increasing significantly. At the tail end of this business, you will get non-performing small ticket unsecured NPLs, which is the business of Banca IFIS, right? The market is still there. We are seeing a bit more sophistication on the seller side, meaning that they tend, first of all, to be well aware of the value of their portfolio. We are having very structured and well-informed discussions between technical teams about what the value is.
There seems to be a trend towards forward flow agreements, i.e., slightly longer-term partnerships between banks like us or players like us that can acquire these portfolios and the originators for simplicity, but also for efficiency. On that basis, we are currently purchasing, we're being quite successful, actually. We are entering into quite a number of these agreements in the last months, and we're buying some rather fresh, newly generated NPLs on balance sheet. On calendar provisioning, what we received from Illimity is about EUR 40 million of calendar provisioning. Of this, about EUR 30 million is in turnaround. You can find a reference in the deck. I think it's slide nine, right? On this, keep in mind that we have quite an ongoing strategy of getting rid of loans that are subjected to calendar provisioning or on purchased NPLs that start to exhibit calendar provisioning.
We have not continuously updated the market on each and every transaction because it gets a bit detailed, but keep in mind that there is a continuous maintenance going on in our balance sheet where we sell basically exposures that are subject to calendar provisioning on a fairly continuous basis. At least annually, we do certain transactions that have that type of objective. Calendar provisioning inside the Banca IFIS perimeter is very low. I cannot quantify the specific point, but not something that is really material on the overall balance sheet because we do this maintenance work, okay? From Illimity, we got EUR 40 million, roughly. I hope I answered your question.
Yes. Thank you.
My question also referred to the project that you announced actually now a few years ago that was aimed at continuing to grow in the NPL segment through joint ventures with specialized partners in order to consolidate new purchases. Is it something that is still in the cards? Is it something that is still interesting for you?
Yes, definitely. It's still in the cards. We want to do that in a very clear and calm regulatory environment, and it requires, obviously, partners. These are very concrete projects and discussions that are underway, and as soon as we can, we will be clear, Simonetta. It's just we're not in a rush in that respect. We're actually purchasing now on our own balance sheet, and it's very good business, right? We'll do the cleanups as they become necessary.
In the meantime, that project is confirmed, and we're working on it, and if something changes, we'll be explicit about it in the market, but I can't give you a specific date when the structure will start, okay? It's not very long.
Thank you. Yeah.
For any further questions, please press star and one on your touch-tone telephone. Mr. Geertman, there are no questions registered at this time, so we're back to you for any closing remarks.
No, thank you. No closing remarks beyond saying that we're working very hard and we're very encouraged by what we found, and we'll update you with everything that we couldn't fully say in Q3. We'll be able to say in Q4 when the projects are closed and the due diligence is closed. For now, we are confident and we're pleased with the way the project is going.
I wish you all a good day, and we'll talk after Q4. Thank you. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.