Banca IFIS S.p.A. : in the first half of 2016 more robust capital position and constantly improving credit quality

 

 

RECLASSIFIED DATA1

  

1st half 2016

1 January - 30 June

 

-Net banking income: 150,9 million Euro (-43,1%)

-Net profit from financial activities: 135,2 million Euro (-45,4%)

-Operating costs: 76,8 million Euro (+48,2%)

-Profit for the period: 39,1 million Euro (-70,1%)

-Cost of credit quality for trade receivables: 78 bps

-Bad loans ratio in the trade receivables segment: 1,1%;

-Hiring up: 120 new staff added in the first 6 months of 2016 (+22,4%);

-Common Equity Tier 1 (CET1): 15,4% (15,8% at 31 December 2015)2;

-Total Own Funds Capital Ratio: 15,4% (15,8% at 31 December 2015)2. 

 

2nd quarter 2016

31 March - 30 June

 

-Net banking income: 74,3 million Euro (-61,5%)

-Net profit from financial activities: 66,8 million Euro (-63,4%)

-Profit for the period: 17,1 million Euro (-83,7%).

 

 

Mestre (Venice), 28 July 2016 - The Board of Directors of Banca IFIS met today under the chairmanship of Sebastien Egon Fürstenberg and approved the interim financial report for the first half of 2016. 

"The Banca IFIS Group has been growing for several years now, and continued to grow also in the first half of the year across all segments", said Giovanni Bossi, Banca IFIS CEO. "Although the comparison with 2015, when the rebalancing of the government bond portfolio resulted in a 124,5 million Euro capital gain, doesn't express the results in a fair way, we performed positively across all business areas in the first six months of 2016, and can thus confirm the targets for the upcoming quarters."  

 

 

Here below are the main factors that contributed to the result for the first half of 2016:

 

-Net banking income3 totalled 150,9 million Euro, -43,1% from 265,4 million Euro in the first half of 2015. Excluding the gain made in April 2015 as part of the rebalancing of the government bond portfolio (124,5 million Euro), at 30 June 2016 net banking income was up 7,1%. There was a significant increase in the DRL segment (61,1 million Euro, +202,8%). Also Trade Receivables and Tax Receivables were positive (81,4 million Euro, +5,3%, and 8,0 million Euro, +6,7%, respectively). Meanwhile, Governance and Services was down (0,4 million Euro, -99,8%) because of the decrease in interest as a result of the reduction of the government bond portfolio as well as the increase in funding costs due to rising volumes.

 

-Net value adjustments3 totalled 15,8 million Euro. They referred for 11,8 million Euro to loans to customers (compared to 13,4 million Euro at 30 June 2015, -12,5%), and for 4,0 million Euro to impairment losses on unlisted equity securities.

 

-Operating costs totalled 76,8 million Euro, up 48,2% from 51,8 million Euro in June 2015; this was largely attributable to other administrative expenses as a result of the higher business volumes in the DRL segment-especially as far as pre-collection and collection costs are concerned. As for personnel expenses, amounting to 27,6 million Euro (23,7 million Euro in June 2015, +16,5%), the increase was the result of new hiring in the first half of 2016 (120 staff, +22,4%), consistently with the goal to strengthen some areas and services supporting the business, and especially the DRL segment. At 30 June 2016, the Group's employees numbered 807. The cost/income ratio (ratio between operating costs and net banking income) stood at 50,9% at 30 June 2016, compared to 19,5% at 30 June 2015. 

Profit for the period totalled 39,1 million Euro, compared to 130,8 million Euro in June 2015 (down 70,1%). 

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For a better understanding of the result for the period and the relevant comparative data, the following should be noted:

 

-Interest receivable and similar income: the item included 7,7 million Euro arising from the reclassification to amortised cost of a sizeable portion of the DRL portfolio (over 197 million Euro) following the end of the documentary verification process and the ensuing collection of bills of exchange and settlement plans.

 

-Gain on the sale of receivables: the item included 5,7 million Euro in gains on the sale of some portfolios of DRL receivables. At 30 June 2015, the Bank had not finalised any sales.

 

-Gain on the sale of available for sale financial assets, totalling 5,5 million Euro in the first half of 2016 as a result of the sale of part of the bond portfolio, compared to 124,5 million Euro in the prior-year period arising from the rebalancing of the bond portfolio. 

 

-Other administrative expenses included the 2,1 million Euro contribution for the whole of 2016 to the Deposit Guarantee Scheme and Italian Bank Resolution Fund, as required by the Bank of Italy's Communication of 19 January 2016.

 

-The income tax expense for the period and the relevant tax rate included the impact of the settlement of the tax dispute for the years 2004-2005. As a result of the agreement, the Bank recognised 1,6 million Euro in interest expense, penalties and taxes. At 30 June 2015, it had estimated the relevant contingent liability to amount to zero.

 

As for the contribution of individual segments to the result for the first half of 2016, here below is a description of how the sectors that made a significant or greater-than-expected contribution performed:

 

·Trade Receivables: the net banking income of the trade receivables segment amounted to 81,4 million Euro (+5,3% compared to 77,3 million Euro in the first half of 2015). The segment generated 5,0 billion Euro in turnover (+7,5% from the first half of 2015), with 4.879 corporate customers (up 12,3% compared to the prior-year period) and 2,8 billion Euro in outstanding loans (-3,1% from December 2015). 

As for net value adjustments on receivables, they totalled 11,6 million Euro (13,4 million Euro in the first half of 2015, -13,9%). The ratio of credit risk cost concerning trade receivables to the relevant average loan balance over the last 12 months was down to 78 bps from 112 bps at 30 June 2015 and 90 bps at 31 December 2015.

 

·DRL (Distressed Retail Loans): net banking income amounted to 61,1 million Euro, compared to 20,2 million Euro in the prior-year period (+202,8%). The results for the first half of 2016 were positively influenced by the reclassification to amortised cost of a sizeable portion of the portfolio following the end of the documentary verification process and the ensuing collection of bills of exchange and settlement plans, adding nearly 7,7 million Euro to net banking income, as well as the closing of a sale of 5,7 million Euro worth of assets and the accelerated activation of the plans collected, ensuring a more timely contribution to net banking income. Starting from the first six months of 2016, the Bank revised the compensation policy for debt collection networks, aligning the payment of the commission with the accounting activation of the relevant plan.  

 

·G&S (Governance and Services): net banking income was down 99,8%, from 160,5 to 0,4 million Euro, largely because of the rebalancing of the securities portfolio in April 2015, which caused interest income to decline. This was partly offset by the sale of 2,1 billion Euro worth of government bonds in the first half of 2016, resulting in a 5,5 million Euro gain. As for retail funding (3,5 billion Euro, compared to 2,9 billion Euro at 30 June 2015), the cost amounted to 1,28%, compared to 1,30% in June 2015, and it is expected to rise slightly as a result of the new 3-, 4-, and 5-year maturities for rendimax.

 

Concerning the statement of financial position, here below is the breakdown of net non-performing exposures in the trade receivables segment alone:

 

·Net bad loans amounted to 31,0 million Euro, essentially unchanged from the end of 2015 (+0,2%); also the segment's net bad-loan ratio was flat on 31 December 2015 at 1,1%. The net bad loans/net equity ratio amounted to 5,5%, compared to 5,4% at 31 December 2015. The coverage ratio stood at 88,4% (87,9% at 31 December 2015).

 

·The balance of net unlikely to pay was 55,4 million Euro, +40,0% from 39,6 at the end of 2015. The increase was largely attributable to two individually significant positions previously classified under net non-performing and performing past due exposures. The coverage ratio stood at 28,2% (32,1% at 31 December 2015).

 

·Net non-performing past due exposures totalled 108,9 million Euro, compared with 58,2 million Euro in December 2015 (+87,1%). The increase was attributable to past due loans due from the Public Administration that were purchased outright, rising from 1,2 million Euro at the end of 2015 to 46,0 million Euro at 30 June 2016 (with 43,8 million Euro referring to the utility segment). The coverage ratio stood at 1,6% (2,6% at 31 December 2015)

 

At 30 June 2016, net Equity was 562,2 million Euro, compared to 573,5 million Euro at 31 December 2015 

(-2,0%). The change was largely attributable to the 39,1 million Euro profit for the period and the 40,3 million Euro dividend payout for 2015. 

As for capital adequacy ratios, the Total Own Funds Capital Ratio was 14,2% (14,9% at 31 December 2015) and the Common Equity Tier 1 (CET1) 13,2% (14,2% at 31 December 2015). 

Consolidated own funds, risk-weighted assets and solvency ratios at 30 June 2016 were determined based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013. Article 19 of the CRR requires to include the unconsolidated holding of the banking group in prudential consolidation. The capital adequacy ratio of the Banca IFIS Group alone, presented exclusively for information purposes, is attached to the present release.

 

The supervisory authorities have informed the Bank of its new minimum capital requirements, which are the following: Common Equity Tier 1 (CET1) 7%; Tier 1 Ratio 8,5%; Own Funds Capital Ratio 10,5%. In light of the Bank's capital adequacy ratios at 30 June 2016, its position is especially robust. 

 

For more details, please refer to the Consolidated interim financial report at 30 June 2016, available under the "Corporate governance" Section of the website www.bancaifis.it 

 

 

Pursuant to Article 154 bis, Paragraph 2 of the Consolidated Law on Finance, the Corporate Accounting Reporting Officer, Mariacristina Taormina, declares that the accounting information contained in this press release corresponds to the company's accounting records, books and entries.

 

1 Net value adjustments on DRL receivables, totalling 16,4 million Euro at 30 June 2016 compared to 3,1 million Euro at 30 June 2015, were reclassified to Interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.