Welcome, and thank you for joining the Banca Ifis first quarter 2026 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Frederik Geertman, CEO of Banca Ifis. Please go ahead, sir.
Thank you, madam, and good afternoon, everybody. Welcome to our first quarter 2026 results call. I am joined today in the conference room here by our Chairman, Ernesto Fürstenberg Fassio, and by my whole senior team, including the CFO and the investor relations representative as usual. Let's go straight into the presentation. I will take you to page 4 to the executive summary. As you will appreciate today, we will have both comments on results Q1 and on more strategic matters. Page 4, active portfolio optimization in a clear strategic direction. We report steady profitability in a seasonally slightly softer quarter. We had a net income of EUR 31 million. It was quite in line with what we were expecting.
Performance supported by a strong contribution from illimity's turnaround segment following the restructuring of a large exposure, whilst the NPL revenues were a bit softer, driven by timing and nature of our portfolio purchases. Non-core asset valorization firmly underway. We are really pleased to report that we are in advanced negotiations for the disposal of two of our largest non-core subsidiaries, AREC neprix and Abilio, representing a significant step in operations and balance sheet simplification, subject to regulatory approvals, of course. Strategic optionality for the NPL business. You might have read in the press release, in response to higher capital absorption linked to calendar provisioning, Banca Ifis is proactively evaluating a full range of strategic alternatives for the NPL platform, including possible deconsolidation. Capital strength. CET1 confirmed at 13.7% at 31st of March.
That excludes the net income of the quarter and deducts the full dividend that will be paid out in May, confirming a solid capital position. Continuous focus on shareholder returns. You will recall overall dividends for 2025 at EUR 2.12 per share, of which EUR 1.20 was paid in November, and the remaining EUR 0.92 will be paid on the 20th of May. Clear strategic direction. We are proactively reshaping our business model towards a well-rounded SME banking specialist, ensuring proactive alignment with the regulatory environment and the risk profile of the group, and this refers to the NPL business, of course. The illimity Bank acquisition and the Fürstenberg division mark concrete milestones of a long-term transformation focused on sustainable value creation to be fully articulated in the business plan when we will present it. Page 5, consolidated results.
You will see that in the third quarter and the fourth quarter of 2025, we had quite violent swings in the net result. The third quarter benefited obviously from the badwill of the transaction. The fourth quarter obviously took into account the due diligence and the provisions we took on illimity's assets. The first quarter of 2026 represents kind of a normalized, or more normal, I would say, combined entity quarter, where we post EUR 31.3 million net profit. I would draw your attention to the revenue part. As mentioned, the NPL revenues were a bit softer given our repositioning towards forward flow agreements that serves the early disposal practices of the major originators.
This is a strategy that implies a much more gradual recognition of revenues with lower upfront contributions than in the past. Whereas in the turnaround business, which is illimity, performance reflects the successful early repayment of our exposure to an Italian mid corporate following the entry of new shareholders. I would stress that this is maybe not completely recurring revenue, but it's core business and the turnaround segment will periodically contribute in this way to our quarterly results. Maybe not every quarter, but this is sort of intrinsic in the business model. I wouldn't characterize it as an entirely one-off event. I would characterize it as core business.
Page 6, to remind us what the long-term goal is here, to become the country's leading SME specialist by leveraging the excellencies of both Banca Ifis and illimity with a well-rounded comprehensive banking offer that includes digital retail based on illimity's brand and platform and includes private banking and investment banking on the Fürstenberg brand. That's the path we are on, and you should see in this light also the disposals that we have that we are working on in these months as we reach this type of setup. Page 7, our path towards this. A short time ago, you will remember we sold the 50% stake in Hype. We continue to speedily execute strategic action. That may mean accepting some earnings volatility in the quarters.
As said, we are in advanced negotiations for the disposal of two of our largest non-core subsidiaries, AREC neprix and Abilio, representing a significant step in balance sheet simplification. These non-core disposals are essential to ensure long-term success of the franchise. They may generate some earnings volatility, as mentioned, they reflect both positive and negative one-offs as they happen. Second element, or priority, if you will, is managing the external environment. You are surely aware that the geopolitical situation, including the conflict in the Middle East, right, may weigh on business volumes and asset quality. The impact remains difficult to quantify at this stage.
It's expected to become more evident in the second and third quarter of 2026. We are very carefully monitoring that whilst making the integration a success in 2026. We are now primarily focused on executing a full merger, full integration, and securing the synergies for the future in creating this well-rounded, comprehensive banking offer, de-risking and reinforcing our long-term resilience. By 2027, we will therefore achieve the full realization of the synergies, enhance illimity's commercial potential. We are really seeing the pipelines filling up. We're seeing an acceleration of the commercial activity, capturing the funding advantages and the strategic value creation created by the new competencies and business opportunities that are coming on board. That leads us to page 8. What are the priorities for 2026? Strengthening resilience while creating sustainable value.
On the left-hand side, the agenda for 2026. First and foremost, commercial relaunch of illimity's core businesses. As I mentioned, we are really seeing some good progress on the pipeline and on the synergies with Banca Ifis's existing businesses. Legal entity integration, capturing IT synergies and group simplification. We gave you a lot of details in February. We take that as an item that we have discussed. Third, the strategic item, evolution of the NPL business model in response to the regulatory context. We will get into it later. Non-core assets disposal and de-risking. The two subsidiaries we mentioned, but also some additional portfolios and assets that we are looking at. Consequentially, some earnings volatility in this quarter.
That will lead us to be able to imagine a new business plan starting 2027 with long-term value creation based on the unparalleled SME and corporate banking franchise. We have a scalable digital retail banking platform, increased capital efficiency, growth of the Fürstenberg division, mostly commission-oriented, so a very welcome addition to our revenue composition, and finally, sustainable and resilient earnings generation. We like to see ourselves as the leader in Italian specialty finance, guided by stable governance and long-term strategic vision focused on sustainability, capital discipline, and long-term value creation by the controlling shareholder, the Fürstenberg family, that is the guarantor of this long-term approach. Page 9, NPL focus. First, optimizing performance in 2026. I mentioned that we are executing targeted purchases now.
The strategy focuses on forward flow agreements with originator partners, a very fresh and low vintage portfolio, that is consistent with the evolution that we see in the markets towards very early disposal programs by the major consumer finance originators. Priority is given to assets that offer faster turnaround and the greater visibility on cash recovery. This targeted approach to forward flow entails a more gradual distribution of purchase volume over time, with lower upfront contributions in the initial phase of portfolio onboarding. As we transition towards this model, NPL-related revenues will experience some moderation in 2026. I draw your attention to the cash collection that remains excellent.
We are very close to collecting between EUR 90 million and EUR 100 million every quarter in this business. The portfolio acquisition activity is supported by existing forward flow agreements that we have already in place with the major originators. Second item of priority is the workout efficiency. We privilege extrajudicial recovery strategies with the objective to accelerate recoveries and reduce the legal costs a bit. Also, we will continue with at a moderate pace, the disposal of portfolio tails. We hope you appreciated that in the last years, we took away some EUR 10 billion of gross book value, very small amount of net book value, realizing some small capital gains, but creating a lot of efficiency in the overall system.
On the illimity NPL side, so the legacy illimity NPL portfolio, you will remember that during 2025, more conservative assumptions have been adopted on recovery time frames and cash collection. That has led, in 2025, to very significant write-downs. We are now executing a run-off strategy, primarily through the natural workout of the positions, to be complemented by some opportunistic asset disposals as they come about. Less exposure to single portfolio acquisitions, improved quality, visibility, and sustainability in the medium term.
Leading page 10 to our assessment of the current environment and taking a slightly longer term perspective, what did we communicate today on the NPL business? In response to increasing capital absorption driven by calendar provisioning, we have started the evaluation of options for the evolution of the business model, a strategic opportunity for capital and profitability optimization of the whole group. Specifically, Banca Ifis is evaluating a spectrum of strategic alternatives. We will calibrate the features of these alternatives as needed, also on the basis of dialogues with strategic partners and potential investors, and they may include the disposal of a stake in our NPL business leading to deconsolidation.
The chosen approach, that's the future business model, will be based on the evaluation of the long-term profit and capital contribution of the NPL business on dialogues, obviously with co-investors and partners, of ensuring full compliance with regulatory requirements. The future contribution of the NPL business to the group, to its earnings, will reflect the business model ultimately adopted. This strategic review is a precursor of the new business plan. The strategic review will be incorporated into the new business plan that will reflect the transformation that the group has initiated with this strategic review. Structurally higher equity requirements are expected, in any case, to lead to a lower NPL contribution to group earnings.
Proactively freeing up capital will allow us to benefit from the growing profitability of the SME and corporate banking franchise, the development of illimity's businesses, and the growth of the Fürstenberg division. That's the key probably to read through this strategic review that we have initiated. Page 11, back to our more typical communications on the quarter. We show you the funding maturities that we have in the next four quarters. Between the second and the fourth quarter of 2026, you can see that we have roughly EUR 3 billion of funding maturities. These deposits, they come at, depending on the bond and the retail side, at higher prices than is than the market offers today. We expect to progressively refinance funding maturities at significantly lower rates. Page 12, asset quality.
You can see a bit of increase in the asset quality ratios. A couple comments on that. The first is a denominator effect. Typically, we have seasonality in Q1 because the peak of assets in our business is normally on the 31st of December, so there's a bit of a denominator contraction. There's also a bit of flow towards non-performing exposures, roughly EUR 90 million. The majority of this is guaranteed. A good part of it is the b-ilty portfolio, which has MCC government guarantees. There are also some corporate exposures that have other types of public guarantees. There are some real estate business with very, very comfortable real estate securities behind it, so fairly modest impact on the P&L with the EUR 90 million flow that represents the continuous cleanup, if you will, of the balance sheet.
Net of the b-ilty portfolio, you could read 5.1% gross and 2.9% net in terms of asset quality. Page 13, capital. We start at a CET1 ratio of 12.95. You will remember that we pro forma that when we discussed it the last time because we had already shown the impact of the transactions that we had made. We start from the formal number on the 31st of December was 12.95, and there you can see the walk to 13.71, slightly below our 14% target that we like to keep as an overall guideline, as an overall target, but where we may have some variation around in the quarters as they progress.
I would stop here with the presentation, and I'm very happy to take your questions, should you have any. Thank you.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchpad button. To remove yourself from the question queue please press star and two. Please pick up the receiver when asking questions. Anyone with a question may press star and one at this time. The first question is from Lorenzo Giacometti with Intermonte. Please go ahead.
Yes, good afternoon. Thank you for taking my question, thank you for the presentation. Let me just say that I think that your new strategy about the NPL business is very proactive. In terms of question, I have actually three. The first one is what regulatory headwinds do you expect from basically the calendar provisioning going on? The second one is regarding the NPL strategy, why did you change the strategy in NPL? I mean, is this change due to a request from the regulator or from other items? The third one is basically, what is your estimate of the structurally lower contribution from the NPL business in the coming years? Thank you.
Yes, Lorenzo, thank you. On the first question, what regulatory headwinds do you expect? Well, the key issue is the impact of calendar provisioning on the capital intensity of the NPL business. Recovery times, if you do a responsible type of NPL recovery are multi-year processes. Both judicial and extrajudicial recoveries take a number of years. It looks incompatible with the timeline of the calendar provisioning, leading therefore to have on your book a very, very capital intensive type of business, which may in the end still be profitable, but as long as you have them on your books, it is very capital intensive.
Our assessment is that this regulatory environment will become more challenging over time as less significant institutions are being asked to apply the rules that the significant institutions have been applying over the last years. We prefer to proactively address it, this regulatory environment, if I may call it, given this given this context. On your second question, why did you change the strategy? The backdrop, I guess, was in your, in your first question. Is this due to a request from the regulator? No. Risk management and capital discipline are key anchors for Banca Ifis, always have been. We'd like to proactively address regulatory evolution rather than, you know, being forced to react to it.
I think you may recall that we took the same approach with respect to our presence in the pharma segment, where we had the purchase of invoices to the Italian public health system, which has generated some sort of issue in the market that everybody is aware of. We exited it in 2022 before it became an issue. We want to have the same approach. This is consistent with the expectations that our controlling shareholder, the Fürstenberg family, has of the behavior of the bank. We started evaluating a broad range of strategic alternatives. They may include deconsolidation, with the objective of optimizing capital usage. That's it.
Final, of course, setup and decision will be based on the overall evaluation of, you know, profit contribution and capital intensity of the solution that we find, and obviously on dialogues with potential partners. We hope to define a clear path, or our objective is to define a clear path in this new environment before the next business plan, so that we can, you know, clearly present a plan on the basis of a solid perimeter and a clear understanding of where we are in terms of business mix. Finally, estimate of the contribution. It's early to quantify precise impact.
As we mentioned, right, the definition of this strategy will require at least a few quarters. It will depend on the structure that we ultimately decide on. We will update the market as these decisions are finalized. The future contribution will depend on those decisions. We want to do this in a transparent approach. I hope you may appreciate that we are today sharing with the market the initiation of this evaluation. We'd like to, you know, keep this a constructive dialogue whilst we are assessing, you know, different options and recalibrate the features as needed. This is, I think, as specific as we can get at this stage on the future contribution, Lorenzo. I hope this is adequate for your questions.
Yes. Thank you very much.
The next question comes from Irene Rossetto with Banca Akros. Please go ahead.
Yes. Hello to everyone. Three few questions from my side. In the first quarter, you reported with illimity a net income of EUR 31 million, including the positive contribution from the turnaround portfolio. This compares with EUR 47 million net income for Banca Ifis standalone in the first quarter of last year. Could you please walk us through the main drivers of this year-on-year delta, and indicate when we should expect the group to fully express its earning potential? Can you confirm if the 2026 guidance of EUR 170-190 million is still valid? Can you explain the change in asset quality ratio in the last two quarters? Can you provide a guidance for 2026 tax rate?
Finally, if you can comment on the risk profile of Banca Ifis post the acquisition of illimity. Thank you.
I'm not sure I got your last question. What was the last one?
Yes. If you can comment on the risk profile of Banca Ifis post the acquisition of illimity. If you perceive that something has changed.
Yeah. Okay. Good. I'll start with the first one. The sources of change, if you will, from last year's net income to this year's, let me first say that, you know, certain businesses like NPL, the equity investment business, the turnaround business, they provide a fairly stable contribution to revenues on an annualized basis. You know, they can be in a quarterly perspective, they can show some seasonality. You should probably assess those in a full year perspective. The first quarter of 2025 was particularly fortunate in that respect. We had a lot of pleasant contributions a year ago. You can also see that if you compare with the quarters that followed, right, that were a bit more a bit softer.
In the first quarter of this year, as you mentioned, right, we had this contribution from the turnaround division. They executed a transaction which is a good example of illimity specializations, enhancing our ability to support the SMEs even in periods of difficulty. That gave a fairly robust, I wouldn't exactly call it a one-off, but certainly a very robust contribution in the first months. Then NPLs, as we've discussed, right, there's a repositioning going on towards, you know, forward flow with a much more gradual revenue contribution. Also, I would add, we had a bit of slowdown in judicial recovery, given that we restructured the way we manage the outside legal counsel when we recover loans.
That gave us a bit of complexity, a bit of need to adapt, leading to a bit of slowdown. These two items more or less offset each other and in that way, the quarterly profits ended up roughly in line with our expectations. You asked us about the guidance. Well, we've just seen the first quarter results. They were broadly in line with our expectations. At this early stage, with 3Q to go, we wouldn't offer any elements that would lead us to revise it. I would state, though, that we, our strategy is focused on execution, de-risking, capital management, and we are in a transition year, we will be focused primarily on reinforcing long-term resilience.
Also, when we sell portfolios or businesses. I would signal there is a need for a degree of prudence, both in terms of macro. If we look at the conflict in the Middle East, it has implications both for volumes and for asset quality. We believe they will become apparent during 2026. Expect some earnings volatility and hear a word of caution in the outlook. That said, at this stage, we would for now confirm the guidance and add that we are actively monitoring risk factors that could materialize and that we will obviously prioritize the execution of our simplification and integration strategy. Asset quality. It's more or less what I mentioned when I presented the slide. There's not a lot more to say.
Most of it is deterioration of loans with some form of guarantee behind it. B-ilty is a big contributor. B-ilty was the small business MCC lending business of illimity. It's been placed in run-off, so we are managing the portfolio and we're seeing flows to default that are typical of that type of business model, which historically Banca Ifis stayed away from and which in illimity we have placed in run-off. Most of it is that. Guidance on the tax rate. I'm looking at the CFO. I think he's better placed than me to answer it. I give the words to Roberto Ferrari.
Thank you, Fred. Ciao, Irene. Tax rate last year, we benefited from the patent box, so the tax rate was very low, at around 30%. This year, we need to take into consideration the increase in Euribor for 2% and not the deductibility on negative interest rate for 4%. Actually, we have a projection of a 38% tax rate for 2026. At the same time, as we said last time, we have EUR 60 million of DTA that we should recover in 2026, when we merge with illimity at the end of the year. Thank you.
Irene, your final question on the risk profile, I think you mean after the illimity acquisition, right?
Yes, correct.
Following an acquisition like that, a major acquisition, it is obvious that we would go through the combined entities' activities, right, to reassess them and to realign them. Illimity brings a significant long-term value to the group in terms of its specializations, especially in SME and also the retail banking platform that we didn't have anything that was close. That works very nicely also in terms of cheaper funding. I would say if you look at risk, there are two things you should consider, I think risk. One is complexity. Being in businesses that are not typical of banks in our country, or owning assets that are not typically placed on the balance sheet of banks in our country, right?
The other is the actual risk, right? The inherent risk in the assets that you hold. We are progressively executing a strategy to de-risk both in terms of complexity, so the first type of risk I mentioned, and in terms of the type of assets we want to hold, right? As we progress, we will obviously monitor the CET1 ratio and the P&L impact of what we do in order to have a path that is manageable. I wouldn't call it anything extraordinary. I think it is quite normal if you make an acquisition of the type we made, right, that you reevaluate the businesses that were there.
There was a lot of diversification in illimity also in things that are a bit further away from what we consider core. They had also, by the way, initiated a simplification already before the OPAS, and we are fundamentally still executing that.
Thank you very much.
The next question comes from Simonetta Chiriotti with Mediobanca. Please go ahead.
Good afternoon. Regarding the NPLs, the project of establishing joint ventures had already been mentioned in the past. Is it correct to interpret today's communication as an acceleration that could lead to an exit from this segment, and which could be the potential impact on the capital ratios of the group and on profitability? I mean, NPL represented 40%-50% of standalone profits in the last few years. In light of this, also, how do you comment the guidance that you gave for 2027. Also remaining on the NPL, but looking at the first quarter results, there is a strong reduction in revenues year-on-year.
You have mentioned the focus on forward flow, but I think that is something that characterized also previous quarters. If you could elaborate a bit more on the trend in revenues of this segment. Finally, in factoring, revenues declined by 9%, and the net profit of this segment has, it's just 1Q , but also on factoring, could you comment the fundamentals of this segment? Thank you.
Oh, sorry, Simonetta. I was talking with the microphone switched off.
I think I had a bit of difficulty understanding you, but I think your first question was about, you know, the impact of this strategic review on the earnings contribution in the future, right, of the NPL business?
Yeah.
Well, as I mentioned before, I understand your need for facts and for clarity. The future role of this business will depend obviously on the business model that we choose, right? That's currently under review, right? Towards the end of the year, we will have the, you know, definitive clarity about, you know, what setup that is going to be. Obviously we are searching for regulatory efficiency, meaning capital efficiency. And we will see how we can construct that in the best way, both in terms of flows and in terms of the existing stock, right? Our preferred outcome would be operate under a capital efficient partnership oriented model. Okay? That will be partially offset or maybe entirely offset over time by allocating capital and growth.
I think you need to switch off your microphone if you can. Thank you. That will be offset by proactively reshaping, right, towards growth in SME banking and therefore substituting that type of capital commitment with more SME oriented, typical, if you will, banking capital commitments. The way that's going to pan out, I think it's a little bit early to say. You asked about the quarterly reduction in revenues. You noticed that there was a quite a significant reduction. I would say it's a long-term trend.
We had some, o nce again, if you compare quarter by quarter and you go into the details, you're gonna find that maybe in some quarters you had the contribution of a portfolio sale, maybe in another quarter you had the release of a new portfolio that you bought and that gave you some upfront. I think broadly what we mentioned is what you should keep in mind if you think about, you know, future contribution of this business. Expect in the next part, in the next quarter, say why, if I had to make a prediction, a gradual improvement of the economics.
The NPL business, and I think this is important to put into perspective, the historical contribution of the NPL business in the golden years, if you will, of the bank, is unlikely to repeat itself in the next couple of years. Also if we think about, you know, what are the consequences going to be of substituting this business, we're not substituting something that would make the type of revenue contribution that it made in the past. Factoring, we see a certain contraction in terms of revenues year-over-year. Part of this is base rate effect. The first quarter of last year, we still had a Euribor where there was slightly higher. Part of it is a mix effect.
Slightly more exposure towards slightly safer and larger corporates that pay a bit less. The aggregate spread of that business has decreased a little bit. Part of that is base rate effect, of course. If you look at the net revenues over the customer loans in the first quarter of 2025, it was 6%, now it's 5.6%. Once again, it's a mix of or a combination of mix effect, client effects, and of base rate effects. Still a very healthy business. We have an average spread of 3.6% on top of the base rate plus commissions.
You know, it's still a very, very healthy business, but slightly less than a year ago.
Thank you.
The next question comes from Davide Giuliano with Equita. Please go ahead.
Hi, good afternoon, and thank you for taking my question. I have three. The first one on the two assets that you want to divest in second quarter, I mean, AREC neprix and Abilio. Can you give us more color on the two assets that you want to divest, and what impacts can we expect in the coming quarters? Are there any other assets that you are considering for disposal among the illimity non-core assets and eventually, which is the expected timeframe? The second one regarding asset quality. I was wondering if you can provide us with a comment on asset quality for SMEs. Right now, are you seeing signs of significant asset quality deterioration in early second Q? The very last one on the CET1 ratio, what do you expect at year-end on this front?
Thank you.
Okay. Thank you, Davide. Very clear. Yeah. The two assets that we are in advanced negotiations about, I want to use formally the right words. One of them is a very competent servicer, but that is active in a type of NPL business that's different from what we did historically. The other is fundamentally a real estate agency business, very different from what we normally do. It's quite a significant result if we, you know, manage to confirm these divestments. The two assets together, in terms of net profit contribution, if you add them up, they're more or less neutral. We will not see a contraction of net profits due to the sale of those assets. They are quite significant in terms of size.
The combined size of the two companies is roughly 250 full-time equivalents. If you consider that illimity in total has about 630 now, the subgroup, right? You can appreciate that it's a very, very significant simplification of the perimeter of the group and of the complexity that we need to manage. Other assets that we're looking at, we're looking at some portfolios, and we're looking at some specific assets. In general, we would comment on them when we are ready a little bit further in the process.
I would, you know, maybe stop here and say that, yes, there's additional conversations going on certain items, but we will make them apparent when we're a little bit further down the road. Asset quality deterioration outlook. Yeah, we get that question almost every time, right. Obviously there's macroeconomic uncertainty. There's dislocation in terms of energy. There's one billion barrels of oil are missing, even if the Strait of Hormuz would open tomorrow morning. There's all sorts of raw materials that are experiencing stress levels in terms of availability. You would expect a macro impact. At this stage, we don't have any signal, even in our forward-looking risk indicators.
You may remember we always put payment times, for instance, in the presentation, and it's all looking very normal and regular today. The only thing I would say is that it appears that companies are slowing down a bit on their CapEx decisions. We see it in leasing, for instance, since March. Not quite clear whether it's fiscal tactics as they wait for certain laws and regulations to become clear, or whether it's general uncertainty and postponement of CapEx decisions. We see a bit of slowdown in terms of long-term lending and capital expenditure. That's basically it. Typically, there's a time lag before these macro items materialize and before they impact your balance sheets. I think we can say a bit more on it in Q2, Q3.
We are taking a cautious and prudent approach on the outlook. I would stress that it may become necessary to have more provisions in the coming quarters than what we've seen in the last quarters. Finally, CET1 ratio, I'll give it to Roberto.
Okay. Thank you for asking, Davide. We do expect our CET1 ratio to land between 13.5 and 14% by year-end. We also need to consider the usual seasonality on our loan book, mainly factoring that we have at the end of the year. I also underline the fact that our last quarter is richer in term of profitability compared to the previous 3Q actually, it's normally linked to growth in loans at the end of the year. Thank you. Thank you for asking.
Thank you. Just a follow-up on DTAs. Do you expect DTAs to write up, let's say, in third quarter or in fourth quarter? Thank you.
We will book DTAs when we will complete the merger with illimity, so the full integration. It should be the last quarter of the year. Thank you.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. The next question is from Giuseppe Grimaldi with BNP Paribas. Pl ease go ahead.
Good afternoon, everybody, thanks for the strategic kick off. I have actually two questions. The first is around the trajectory of the NII. As far as I understood, this quarter has been impacted by the lower, let's say, performance of the NPL business. I would like to understand what we should expect in the quarters to come in terms of NII progression, also on the back of the most recent rate movement. The second question relates to the 2027 guidance that you gave at the time of the deal was presented. I know it's pretty early days, but do you feel still comfortable to confirm that kind of outcome for 2027?
Maybe just a third one, which is around the capital allocation. You said clearly that you want to prioritize capital relocation in outside the NPL business. What is basically the main business in which you want to relocate capital? Is it, at the moment, the main alternative you have, corporate lending, or you're thinking of something else? Thank you.
Yeah. Thank you. The NII trajectory is going to be impacted by a couple of things. One is a little bit of funding benefits that we showed it on the slide. We expect that to help us. The second, a little bit of Euribor sensitivity. We've seen some increase in the base rates given the macro situation. These are pluses. We hope to have a little bit more contribution on the NPL side also in the next quarters. Not something that is going to be materially different, but a little bit more would be nice. I would imagine a slightly improving NII path going forward.
In addition, obviously, the other contributors of the P&L. In terms of 2027 guidance, yeah, it's a bit early days. Now, first of all, I would re-underline that the external environment has become a lot more uncertain, with implications for volumes and asset quality, especially when we get to 2027, right? The second thing I would underline is that we have initiated the strategic review of the NPL business, right? We are assessing a range of options, and before we know how we land there, it's going to be hard to have a firm understanding of the 2027 profit contribution of that business. We note that analyst expectations have become a lot more cautious.
We are now seeing a cluster around roughly EUR 190 million. We would agree that caution is reasonable, right? In confirming the synergies as we presented them previously and reporting that we are happy with the progress on the integration, this is, I think, as much as we can say today in 2027. We will revisit the numbers when we have clarity on the business set up and on the perimeter of the group. Finally, capital allocation. Yes, if we would free up capital from the NPL business, then we would have some available. In that case, I think we could definitely see a number of specializations in terms of SME banking, where it's worthwhile to do it.
Generally, I think we would be looking at types of businesses where specialization matters, spreads are important, and where you don't compete with the large institutions on cost of funding, right? Because on that item, obviously, we wouldn't be obviously the, the best player. This is probably the way we're thinking about where to allocate capital. Obviously, when we will write the business plan, there will be also maybe some thinking about, you know, new businesses to enter and new things to evaluate.
Thanks a lot.
Mr. Frederik Geertman, there are no more questions registered at this time.
Great. Well, thank you very much. Thanks for your time and attention. We will see you with the six months results early August. In the meantime, I wish you a pleasant afternoon and a good evening. Thank you all for your time and attention.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.