Banca Sistema closed the results as at 30 September 2019 up, with net profit rising by 12% to 21,4 million euro compared to the previous year: “In a particularly challenging economic context – commented Gianluca Garbi, Bank CEO - Banca Sistema closes the first nine months of 2019 with double-digit growth: net profit is up 12% y/y, equal to 21,4 million, capital ratios significantly strengthened with CET1 ratio pro-forma at 13,4% and pro-forma TC ratio at 17,2%, volumes and loans continue to grow both in the core businesses of factoring and salary-backed loans and in pledged credit”.
Commercial trend
The factoring business line, with volumes (turnover) of 2.091 million, recorded a growth of 22% y/y, also thanks to the greater purchases of receivables from healthcare system operators. Based on the latest data available, the Bank confirms its positioning, in terms of volumes, as the leading operator in Italy specialized in factoring to the Public Administration. The contribution to the turnover generated by agreements with commercial banks was approximately 27% of the turnover.
Group factoring loans as at 30 September 2019 (management figure) amounted to 1.822 million (of which 24% in legal action), up by 6% compared to 1.711 million as at 30 September 2018 and down compared to 30 June 2019 Factoring without recourse equal to 89% of loans (87% as at 30 June 2019) is represented by trade receivables (59%) and tax receivables (30%).
With reference to the CQS/CQP business, the Group purchased/disbursed loans for €186 million and the stock of loans as at 30 September 2019 amounted to €767 million, up by 26% yoy and 2% compared to 30 June 2019.
After the start of the business at the beginning of 2017, the opening of the branches and the constant growth in volumes, the loans of the credit on the pledge stand at approximately 10 million with the underlying number of contracts slightly above 8.000.
Economic results as at 30 September 2019
The interest margin, equal to 58,4 million, is up by 10% y/y, thanks to the growth in loans, both from factoring and CQ, and to the greater contribution of the securities portfolio.
The higher interest income (80,3 million vs 71,6 million as at 30.09.2019 and 30.09.2018 respectively) more than offset the increase in interest expense y/y. The cost of funding is down y/y, equal to 0,8% (0,9% in the first nine months of 2018).
The increase in interest income is mainly due to the higher y/y contribution of factoring due to higher default interest from legal action, the higher contribution of the CQ and the higher contribution of the government bond portfolio.
The total contribution to the income statement as at 30 September 2019 of triggered default interest is up and equal to 24,3 million (20,1 million as at 30 September 2018), of which 4,8 million deriving from the update of the recovery estimates (6,6 million as at 30 September 2018). The update of the expected recovery percentages of default interest on factoring and the related collection times used for the estimate is due to the progressive consolidation of the historical series, in line with the evolution of the business.
The amount of default interest from legal action, accrued as at 30 September 2019 and relevant for the purposes of the allocation model, is equal to 104 million, while the receivables recognized in the financial statements are equal to 50,1 million. The amount not transferred to the income statement will enter the income statement for the coming years, on an accruals basis or on a cash basis, on the basis of collection expectations, exceeding 80%.
Net commissions, equal to €12,5 million, are up sharply y/y (+18%), thanks to the growth in factoring commission income (+23% y/y), which more than compensates for the higher related commission expenses to the collection of deposit accounts abroad. The commission component of factoring must be considered together with the interest component, consequently the contribution in terms of total revenues of factoring, given by the sum of interest income and commission income, increases year on year in absolute value, but decreases slightly if compared to the credit average. Both commission income and commission expense include, from the second quarter of 2019, the contribution deriving from the new CQ direct origination business following the acquisition of Atlantide.
As at 30 September 2019 treasury profits, amounting to €1,9 million, deriving from the portfolio of Italian government bonds contributed more than the previous year (+1,3 million y/y).
Operating income stood at €73,1 million, up 13% y/y, thanks to business growth.
Net value adjustments for credit impairment amounted to 6,4 million, up y/y, in line with the last few quarters, due to the evolution of factoring loans to the public administration and private individuals. The cost of credit relating to loans to customers amounted to 35 bps, up slightly compared to the whole of 2018 and down slightly compared to the first half of 2019.
The resources (FTE) of the Group, equal to 210, are higher than the 179 of the same period of 2018, mainly following the entry into the Group of the resources of Atlantis. Personnel expenses increase y/y in line with the increase in the workforce and also for an incremental cost component of approximately 0,6 million as an estimate of charges related to redundancy incentives and cost related to non-competition agreements . Excluding the one-off integration costs of Atlantide for €0,6 million, the item other administrative expenses (which includes the contribution to the Resolution Fund for approximately €1,1 million) together with the item value adjustments on tangible/intangible assets (which includes the amortization of the “right of use” of the leased asset, following the application of IFRS16) increases y/y mainly due to the consolidation/merger of Atlantide and to higher legal and IT expenses.
The increase y/y in Total operating costs (+14%) was also contributed by the provision for risks and charges, amounting to €1,3 million, in particular in the second quarter of 2019 due to contingent liabilities from ongoing disputes.
Profit before tax as at 30 September 2019 up Y/Y amounts to €31,4 million (+8% Y/Y). The result of the sale of the 21,4% stake in the share capital in Axactor Italy SpA, already recorded in the first quarter of 12, also contributed to the formation of the net profit, equal to €10 million, up by 2019% y/y. for about 565 thousand. While the sale of the 19,9% stakes in ADV Finance SpA and in Procredit Srl which took place in the second quarter of 2019 had no impact on the Income Statement.
