Banca IFIS: Three-year business plan
Banca IFIS: Three-year business
plan
Net profit of 147 million Euro in 2022 with
significant growth in core businesses and less extraordinary
business
Investments of 60 million Euro and 190
new employees
FINANCIAL TARGETS FOR 2022
- Increase in sustainable profit to 147 million
Euro to further improve financial solidity and support growth,
whilst also ensuring payment of a significant dividend to
shareholders;
- ROTE to climb to 8.9%, indicating that the
Group is well positioned in the most profitable segments of the
market;
- CET 1 ratio of 12% in 2022, exceeding the
current SREP threshold¹ of 8.12%;
- Investments of approximately 60 million Euro
in support of organic growth and business stability;
- Stable operating costs due to monitoring and
efficiency gains, despite significant investments;
- Pay-out ratio for Banca IFIS shares of
40%-45%, corresponding to a yield of over 7% at current
market prices.
Profitability of all business
units, with greater competitive advantage in the
NPL and Factoring units; revenue growth is
expected to amount to 602 million Euro, driven by:
- purchases of non-performing loans of 8.5 billion
Euro (nominal amount) in the three-year period for the NPL
segment;
- increase in the volumes of loans to customers during the
three-year period of 1 billion Euro in the
Commercial and Corporate Banking segment, driven by digital
innovation, the new market coverage model and the new
communications and marketing strategy.
Milan, 14 January 2020 – The Board of
Directors of Banca IFIS met under the chairmanship of Ernesto
Fürstenberg Fassio and approved the 2020/2022 Strategic
Plan.
“The new Plan confirms Banca IFIS’s role as a
specialist bank in support of the real economy with the primary
goal of generating increasing, sustainable profit by replacing the
financial component deriving from the PPA with recurring business
profit, whilst also distributing value to its shareholders,”
explained Luciano Colombini, Banca IFIS’s Chief Executive
Officer.
“Today we are presenting a business plan in line
with the Bank's core businesses. A plan that represents maximum
transparency in the face of the market and which will lead Banca
IFIS to further increase its commitment in the coming years to
exploit all opportunities offered by the market in accordance with
its stated objectives. The plan will be implemented by a management
team of professionals with extraordinary track records, offering
proven experience and complementary specialisation. We are a unique
group in the banking industry due to our competitive positioning in
the various markets and our distinctive business model, which we
will continue to refine in order to strengthen our leadership.
The analyses of our strategic positioning and
cost and capital allocation that we have conducted have shown that
all our business areas remain profitable: in particular, NPLs and
Factoring show the greatest competitive advantage. Diversification
thus currently ensures the bank’s stability and reduces its
enterprise risk. Our advantage is that we operate in segments of
the market with ample room for growth and we have better management
skills than our competitors, in addition to exclusive know-how.
Within the Commercial and Corporate Banking
business, we will further increase our presence in the SMEs
segment, which has always been integral to this Bank's identity. We
will do so by developing our model for serving this market through
new investments in digital innovation and a marketing and
communication strategy aimed at increasing the recognisability of
Banca IFIS’s brand. A broader product range, along with a
constantly evolving distribution and operations model, will allow
us to expand our customer base, including in currently less served
but high-potential areas.
The plan also calls for considerable improvement
in asset quality, with a reduction in the loss rate to 75 basis
points in 2022, through careful management of the concentration
risk and reinforcement of the loan disbursement, management and
monitoring process, in addition to recovery of non-performing
positions.
In the NPL segment, we will continue to operate
as primary investors, leveraging on the strength of our servicer,
one of Italy's top servicers: from 2020 to 2022, we estimate that
we will purchase 8.5 billion Euro of new non-performing loans. Our
medium-term strategy will be based on purchasing portfolios of
unsecured loans by participating actively in all sale processes on
the market, expanding the characteristics of the non-performing
portfolios purchased to include the secured and corporate segment
and constantly increasing the efficiency of the recovery process
for non-performing loans.
We do not expect calendar provisioning to have
substantial effects over the three-year period. Afterwards, from
2023 onwards, when the portfolios purchased subject to calendar
provisioning have reached a more significant scale, the strategy
will be to serve as co-investor for NPLs, while continuing to act
as a primary player for the asset classes of reference.
Within the plan, a great deal of attention has
been devoted to regulatory capital performance, with the CET1 ratio
rising to 12% by 2022, exceeding the current SREP threshold of
8.12%, due to the increase in profits,” concluded Luciano
Colombini, Banca IFIS’s Chief Executive Officer.
THE 2020/22 BUSINESS PLAN
Guidelines and
goals
The main goal of the business plan is to
increase the Bank's sustainable profit in order to further improve
financial solidity, fund growth in business and provide
shareholders with attractive returns by distributing dividends.In
2022, profit is expected to rise to 147 million
Euro, with a ROTE of 8.9% at the end of the plan. An ambitious
target has been set for sustainable profit, i.e. net of the
extraordinary effect of the reversal of the PPA², which is set to
rise from 82 million Euro in 20193 to 142 million Euro in 2022 due
to the management actions described in the Business Plan.
Revenues are expected to rise
for both the Non-Performing Loans Division, driven by the purchase
of 8.5 billion Euro (nominal amount) of new NPLs, and the
Commercial and Corporate Banking Division, due to the increase in
disbursements, which will be supported by a new market coverage
model, greater integration between business units and considerable
investments in digitalisation and marketing.
Operating costs are expected to
remain essentially stable over the 2020-22 period, despite
significant investments in IT, digitalisation and marketing, due to
careful monitoring and efficiency gains. The headcount, expected to
be 1,688 at the end of 2022, reflects a natural turnover
performance estimated to give rise to 67 departures through the use
of the solidarity fund, but above all the hiring of
190 capable, dynamic, young, new employees.
The improvement in asset
quality, through a reduction of non-performing loans from
654 million Euro in 20193 to 496 million Euro in 2022, reflects the
reinforcement of the credit risk management process during the
disbursement, management and monitoring of loans and recovery of
non-performing positions, a reduction in concentration risk and the
disposal of NPLs, primarily deriving from the former Interbanca
Group.
Considerable attention has also been devoted to
regulatory capital performance, with the
CET1 ratio rising from 11% in 20193 to 12% in
2022, exceeding the current SREP threshold1 of 8.12%, driven by the
rise in profit.The pay-out ratio is estimated to be 40%-45% over
the plan period; at current share price levels, this percentage
would ensure a 7% yield on current exchange prices.
The funding strategy calls for
funding of 10.5 billion Euro by 2022, of which 5.5
billion Euro from retail customers, 1.4 billion Euro of TLTROs, 3.3
billion Euro of debt instruments and 0.3 billion Euro of other
debts. The Business Plan envisages a more diversified funding mix,
involving the issuance of bonds of 1.7 billion Euro over the three
years, to be implemented in the light of volume trends and the
market scenario, whilst also reducing the cost of funding.
Cost and capital allocation to
the business units
Competitive positioning and capital and cost
allocation to the various business units were analysed as part of
the process of preparing the Business Plan to define the Group’s
strategy and to be increasingly transparent in the face of the
market.The following were analysed for each business unit: the
market of reference, competition and the competitive positioning of
the products/services, the price system, distribution channels,
financial policy, commercial organisation and commercial
strategy.
The cost and capital allocation indicates
that all business units remain profitable and continue to
represent positions of leadership in their markets of
reference. In particular, the NPL and factoring business
present the best competitive positioning and the highest
sustainable profitability. Accordingly, the Bank will
continue to invest mainly in these two segments, which represent
its historical core business and ensure an excellent level of
diversification in profit generation.
FOCUS ON THE MAIN LINES OF BUSINESS: NPLs
Banca IFIS: competitive positioning in
the NPL market
Banca IFIS is the fourth largest NPL operator on
the Italian market in terms of volumes managed (24.4 billion Euro
of NPLs) and is the leader in the unsecured non-performing loan
segment. Banca IFIS was among the first companies to enter the
non-performing loans market, and since 2011 it has purchased over
22 billion Euro of non-performing loans by nominal amount,
recovering over 1 billion Euro in cash from its proprietary
NPLs.
Banca IFIS operates on the non-performing loans
market as a primary investor and owns one of the top servicers
currently operating in Italy. The Bank's main competitive advantage
is its ability to purchase and manage NPL portfolios, paired with a
proprietary database of over 1.2 million Euro of debtors, organised
into uniform groups by type, age, residence, amount due,
profession, recovery times and guarantees.
Even more than the secured segment, the
unsecured non-performing loans segment presents barriers to entry
due to the considerable investments required in terms of personnel
and IT, the achievement of economies of scale, an efficient
organisation to manage internal and external recovery personnel and
an extensive, detailed database. However, the unsecured market is a
relatively mature segment, with prices and margins expected to
remain essentially stable in the coming quarters.In terms of
transactions, we expect the non-performing loan market to remain
dynamic over the next three years, with an increase in transactions
on the secondary market.
In fact, in the three years from 2020 to 2022,
the market is expected to see 84 billion Euro of new
sales of non-performing loans, of which approximately
20 billion Euro of unsecured NPLs. Of the total
transactions, 70% is expected to occur on the primary market and
30% on the secondary market, driven by sales organised by
securitisation vehicles, including those that have benefited from
government guarantees (GACS) and are seeking to improve cash
generation.
The strategy Banca IFIS’s
strategy for the medium term is focused on continuing to purchase
unsecured loan portfolios by participating actively in all
processes on the market, progressively expanding the
characteristics of the non-performing portfolios purchased to
include the secured and corporate segment and constantly increasing
the efficiency of the recovery process for non-performing
loans.Over the three years, strategic actions will primarily be
based on:
- Expediting the integration of FBS into the
Group to take full advantage of complementary expertise
offered by Banca IFIS in the unsecured segment and by FBS in the
secured and corporate segment, and thus to position itself on the
market as a truly integrated Italian operator. To this end, a
minority interest in FBS S.p.A. was acquired in October 2019,
bringing Banca IFIS’s stake in the company to 100%;
- Reorganising the corporate structure in the
NPL segment by concentrating purchase and investment activities
within IFIS NPL and all servicing activities within a newly formed
company, IFIS NPL Servicing, a wholly-owned subsidiary of IFIS
NPL;
- Increasing the efficiency of the recovery
system by cutting costs, achieving operating synergies and
simplifying and digitalising processes;
- Expanding the characteristics of the
portfolios purchased in the secured and corporate segment
through partnerships with niche servicers/investors and hiring
specialised teams.
From 2020 to 2022, Banca IFIS estimates
new NPL purchases of 8.5 billion Euro in terms of
nominal amount, for a total investment of approximately 0.8 billion
Euro. Development of servicing activity on account
of third parties will be selected and reserved to various market
niches. Assets under management are expected to increase to
9.1 billion Euro by 2022.
The long-term strategy, from 2023 onwards, i.e.
when it is estimated that non-performing loan purchases will be
more affected by the calendar provisioning rules, is to act as a
co-investor for NPLs while remaining a primary
player for the asset classes of reference and turning the effects
of the new regulations into opportunities, given that:
- there will be an extended period of low rates, in which NPLs
may prove a new, attractive asset for investors, and Banca IFIS may
play a leading role, enabled by its brand and track record;
- in view of the opportunities to reduce capital absorption and
funding for all new NPL portfolios that will be exposed to calendar
provisioning, the Group will constantly increase its ability to
attract investors directly to act as co-investors in the purchase
of portfolios from the outset or to purchase new NPL portfolios
transformed into paying plans (by monetising capital gains, without
having to further expand the operating machine).
Within this scenario, Banca IFIS may sell part
of such vehicles’ junior or senior notes on the basis of its
financial needs, by forming specific investment vehicles, whilst
continuing to service the portfolios concerned.The project is not
aimed at proprietary NPL portfolios, the loans in which are not
subject to the application of calendar provisioning.
FOCUS ON THE MAIN BUSINESSES/COMMERCIAL AND
CORPORATE BANKING
Banca IFIS: competitive positioning in
the SME credit market
Banca IFIS markets itself as a specialised
operator in support of small and medium enterprises. It is the
number-four operator in factoring in terms of turnover with a
market share of 5.7%; it has a market share of 1.8% in leasing and
engages in the purchase of tax credits on the structured finance
market. The level of concentration of the customer portfolio is
quite modest due to a sound level of fragmentation of exposures in
the face of customers, represented primarily by small and medium
enterprises. The Bank has approximately 80,000
customers: approximately 9,000 companies in factoring and
16,000 in leasing (in addition to 55,000 VAT-registered
self-employed customers), with strong diversification by sector and
a concentration primarily in northern Italy.
The strategy The strategy is
focused on profitable growth, expanding the customer base and
strengthening cross-selling through the following management
action:
- Evolution of the commercial model in the
medium enterprises segment, with the introduction of relationship
managers who will offer customers the full range of Banca IFIS
products (factoring, leasing, structured finance, corporate
finance, working capital management and import/export services),
while promoting cross-selling and up-selling to the customer
portfolio. Local coverage is planned to be improved in areas with
the greatest density of businesses (Lombardy, Emilia Romagna and
the Northeast), alongside expansion of the range of value-added
products and services, with a particular focus on products in
support of companies that operate outside Italy and structured
finance transactions of modest amounts;
- Digital innovation and new online hub for
customers, with custom-tailored business services and private
profiles that may be personalised according to a “self-service”
approach. The new online hub will primarily be used to manage
back-office processes so that personnel may focus on marketing and
advisory activities. Investments of 18.3 million Euro in IT and
digitalisation are planned for the development of the new online
hub;
- Strengthening of credit risk monitoring: over
the three-year period the loss rate is expected to decline by 18
basis points from 101 basis points in 20193 to an estimated 83
basis points in 2022, due to the constant enhancement of
non-performing loan disbursement, monitoring and management
processes.
In factoring the loss rate will fall from 131
basis points in 20193 to 90 basis points in 2022.In leasing it will
fall from 81 basis points in 20193 to 75 points at the end of the
Plan.
·New communications and marketing
strategy with the aim of supporting the new commercial
model. In 2020, a rebranding plan will be presented for the entire
Banca IFIS Group, entailing a new corporate identity and redefined
integral and external strategic communications by the Group in
support of a renewed marketing approach. After years of a
multi-logo approach adapted to each service or product, the bank
will present itself to the market with a single, simplified Banca
IFIS brand and strong positioning in the enterprise segment.
Thanks to these actions, we estimate an increase
in the volumes of loans to customers during the three-year period
of 1 billion Euro in the Commercial and Corporate
Banking segment.
IMPROVED OPERATING EFFICIENCY
The Business Plan calls for a reduction in the
cost/income ratio from 56% in 2019 to 52% in 2022, to be achieved
in part through containment of operating costs. Efficiency will be
improved through numerous management actions aimed at achieving the
following goals:
- Containment of personnel costs, which are
expected to remain essentially in line during the plan period,
rising from 130 million Euros in 20193 to 133.5 million Euros in
2022, despite the increased costs for the negotiation of the
national collective contract (estimated at 5 million Euro) and a
natural increase in the cost of resources tied to the planned
hiring of 190 new employees and departures through the solidarity
fund;
- During the plan period, investments in personnel
training of 3 million Euro are planned, mostly in the
areas of training and digital learning. The Business Plan calls for
the introduction and/or extension of all those activities that aim
to reconcile work/life balance for the purposes of the well-being
and quality of life of the resources employed within the Group:
flexible working is planned to be introduced, together with an
expansion of part-time work, where requested and possible;
- Administrative expenses are expected to remain
essentially stable, rising from 156 million Euro in 20193 to 159
million Euro in 2022, despite the investments and greater direct
costs incurred in order to grow the business. The rationalisation
of the IT platform, optimisation of logistics, optimisation of
licences and renegotiation of contracts will result in a reduction
in costs of 15 million Euro, which will offset the increase in NPL
recovery costs, the greater VAT costs for the formation of IFIS
Servicing of approximately 3 million Euro and the greater
IT/digitalisation and communication costs of 5 million Euro;
- Optimisation of the real-estate portfolio with
the construction of a new property alongside the historic Mestre
office in which to concentrate all personnel currently based in
offices in central Padua and Porto Marghera (Venice), and with the
sale of the property on Corso Venezia in Milan, closed in 2019,
with the concomitant centralisation of personnel at the property in
the nearby Via Borghetto, which will be renovated and modernised.
The sale will be completed in early 2020 and will result in capital
gains before taxes of 25 million Euro and cost savings of 1.5
million Euro;
- Optimisation of the organisational structure
with a reduction in reports to the Chief Executive Officer and the
formation of four major departments, already realised and
implemented;
- Compliance with ESG (environmental, social and
governance) requirements both in terms of the Group’s own
operations, through the use at all Group facilities of energy from
100% certified renewable sources and the implementation of
“plastic-free” company behaviour and culture, and in terms of the
use in its activities on the market and offer to customers of
specific green products and financing programmes focused on support
for activities and investments for corporate environmental
sustainability.
Group’s main financial
targets
|
20193 |
2020 |
2021 |
2022 |
CAGR 19-22 |
Net
banking income |
557 |
575 |
589 |
602 |
2.6% |
- o/w
PPA |
58 |
35 |
18 |
8 |
-47.8% |
Loan loss
provisions (LLP) |
-85 |
-65 |
-65 |
-66 |
-8.2% |
Net
banking income – LLP |
473 |
510 |
524 |
537 |
4.3% |
Operating costs |
-312 |
-332 |
-320 |
-314 |
0.2% |
- o/w
personnel costs |
-130 |
-137 |
-135 |
-134 |
1.0% |
- o/w
other costs |
-182 |
-196 |
-185 |
-180 |
-0.3% |
Extraordinary Items |
18 |
-22 |
0 |
0 |
|
P/L
from sales of investments |
-1 |
25 |
0 |
0 |
|
Pre-tax profit |
177 |
181 |
203 |
223 |
8.0% |
Net
income |
123 |
125 |
135 |
147 |
6.1% |
-
o/w PPA |
41 |
24 |
12 |
5 |
-49.0% |
|
|
|
|
|
|
Customer loans |
7,668 |
8,378 |
8,941 |
9,654 |
8.0% |
- o/w IFIS NPL |
1,350 |
1,584 |
1,787 |
1,936 |
12.8% |
Total assets |
10,412 |
11,299 |
12,196 |
12,730 |
6.9% |
Direct funding |
8,339 |
9,191 |
10,014 |
10,463 |
7.9% |
- o/w customer deposits |
5,139 |
5,071 |
5,217 |
5,467 |
2.1% |
Shareholders Equity |
1,540 |
1,597 |
1,674 |
1,759 |
4.5% |
|
|
|
|
|
|
Cost/income |
55.9% |
57.8% |
54.4% |
52.1% |
|
Cost/income (excluding NPL) |
49.7% |
52.6% |
49.6% |
47.1% |
|
Cost of credit (excluding NPL) |
-1.20% |
-0.84% |
-0.79% |
-0.75% |
|
ROE |
8.2% |
8.1% |
8.3% |
8.6% |
|
ROTE4 |
8.5% |
8.3% |
8.6% |
8.9% |
|
ROA5 |
1.2% |
1.2% |
1.2% |
1.2% |
|
Return on allocated capital6 |
13.3% |
12.2% |
12.2% |
11.8% |
|
|
|
|
|
|
|
CET1 |
1,036 |
1,141 |
1,229 |
1,350 |
|
CET1 ratio |
11.0% |
11.3% |
11.5% |
12.0% |
|
Tangible equity |
1,472 |
1,533 |
1,610 |
1,700 |
|
RWA |
9,446 |
10,099 |
10,667 |
11,223 |
|
|
|
|
|
|
|
LCR |
900% |
600% |
550% |
350% |
|
NSFR |
110% |
110% |
110% |
110% |
|
Disclaimer
This press release may contain written and oral
“forward-looking statements”, which includes all statements that do
not relate solely to historical or current facts but rather reflect
subjective judgments that may or may not prove to be correct, and
which are therefore inherently uncertain. All forward-looking
statements rely on a number of assumptions, expectations,
projections and provisional data concerning future events and are
subject to a number of uncertainties and other factors (including,
without limitation, the economic environment and changes in
governmental regulations, fiscal policy, planning or laws in the
Republic of Italy, other relevant jurisdictions and the EU), many
of which are outside the control of Banca IFIS (the “Company”).
There are a variety of factors that may cause actual results and
performance to be materially different from the explicit or
implicit contents of any forward-looking statements and thus such
forward-looking statements are not a reliable indicator of future
performance. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
may be required by applicable law and regulations. The information
and opinions contained in this Presentation are provided as at the
date hereof and are subject to change without notice. Neither this
Presentation nor any part of it nor the fact of its distribution
may form the basis of, or be relied on or in connection with, any
contract or investment decision.
The information, statements and opinions
contained in this press release are for information purposes only
and do not constitute a public offer under any applicable
legislation or an offer to sell or solicitation of an offer to
purchase or subscribe for securities or financial instruments or
any advice or recommendation with respect to such securities or
other financial instruments. None of the securities referred to
herein have been, or will be, registered under the U.S. Securities
Act of 1933, as amended, or the securities laws of any state or
other jurisdiction of the United States or in Australia, Canada or
Japan or any other jurisdiction where such an offer or solicitation
would be unlawful (the “Other Countries”), and there will be no
public offer of any such securities in the United States. This
Presentation does not constitute or form a part of any offer or
solicitation to purchase or subscribe for securities in the United
States or the Other Countries. Copies of this document are not
being made and may not be distributed or sent into the United
States or the Other Countries.
This press release defines the main guidelines
of economic and financial development of Banca IFIS Group
considering the bank’s market potential in a positive and ordinary
macro scenario. All forecast contained herein are based on 2019
year end preview: we underline that all data referred to 2019 are
the best estimate at the current date and are purely indicative. At
the date of this Presentation all accounting procedure are in
process and will be concluded in accordance with the financial
calendar of the Company. Every preliminary results and any other
figures related to 2019 included in this document are therefore
subject to changes and amendments
Neither the Company nor any member of Banca IFIS
nor any of its or their respective representatives directors or
employees make any representation, express or implied with respect
to such statements nor accept any liability whatsoever in
connection with this Presentation or any of its contents or in
relation to any loss arising from its use or from any reliance
placed upon it.
- 20200114_Banca IFIS_ Piano industriale triennale_ENG
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