Earnings call transcript: BFF Bank sees strong Q1 2025 with solid profit growth

BFF Bank SpA reported a robust start to the fiscal year 2025, with an adjusted net profit of €35 million and a 9% increase in profit before tax year-over-year. According to InvestingPro data, the bank maintains a strong financial health score of 3.26 (rated as "GREAT") and trades at an attractive P/E ratio of 5.55. The bank’s loan book expanded by 5%, and the cost of funding was significantly reduced by over €20 million. Despite these achievements, core revenues were slightly below expectations due to a €12 million impact from rescheduling. The stock experienced a slight decline, with a 0.54% decrease in its price, closing at €8.4.

Key Takeaways

• Adjusted net profit reached €35 million.
• Loan book grew by 5% year-over-year.
• Cost of funding reduced by over €20 million.
• CET1 ratio stands at 13.7%.
• Stock price fell by 0.54% post-earnings.

Company Performance

BFF Bank demonstrated a strong financial performance in Q1 2025, with a notable increase in profit before tax by 9% compared to the previous year. The bank’s loan book continued to grow, reflecting its strategic focus on expanding its lending portfolio. The reduction in the cost of funding by over €20 million further strengthened its financial position. However, core revenues were slightly impacted by rescheduling, indicating potential areas for improvement.

Financial Highlights

• Adjusted net profit: €35 million
• Profit before tax: Up 9% year-over-year
• Loan book growth: 5% year-over-year
• Core revenues: Slightly below February estimates
• Cost of funding: Reduced by over €20 million
• CET1 ratio: 13.7%

Market Reaction

Following the earnings announcement, BFF Bank’s stock price saw a slight decline of 0.54%, closing at €8.4. Based on InvestingPro analysis, analysts maintain a positive outlook with a consensus target suggesting potential upside, with price targets ranging from €9.0 to €15.19. The market’s reaction reflects a cautious sentiment, possibly due to the slight miss in core revenue expectations. InvestingPro analysis indicates the stock is currently undervalued compared to its Fair Value (discover more undervalued opportunities at https://www.investing.com/equities/most-undervalued).

Outlook & Guidance

BFF Bank reaffirmed its guidance for 2026, projecting continued growth and operational improvements. The bank anticipates further reductions in past due amounts and sees potential for growth in the French market, which is currently a small segment of its operations. For deeper insights into BFF Bank’s growth potential and comprehensive analysis, check out the detailed Pro Research Report available on InvestingPro, which provides expert analysis and actionable intelligence for over 1,400 top stocks.

Executive Commentary

Group CEO Mastodiano Bellingeri expressed optimism, stating, "We’re off to a good start this year, now with our expectations." He highlighted France as a market with significant potential, saying, "France is a very small market for us at the moment, but it’s a company which has attractive very high expenditure in goods and services."

Risks and Challenges

• Rescheduling impacts on core revenues could pose ongoing challenges.
• Market expansion in France requires strategic investment and adaptation.
• Macroeconomic factors in Italy and other key markets could affect growth.
• Maintaining a low risk profile amid expanding operations is crucial.

Q&A

During the earnings call, analysts inquired about the impact of rescheduling on revenues and strategies for managing past due trends. The potential removal of a dividend ban was also discussed, alongside efforts to reduce operational risks.

Overall, BFF Bank’s Q1 2025 results reflect a strong start to the year, with strategic initiatives and market expansions poised to drive future growth.

Full transcript - BFF Bank SpA (BFF) Q1 2025:

Conference Operator: Good afternoon, and welcome to the BFF Banking Group First Quarter twenty twenty five Earnings Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would like to turn the conference over to mister Mastodiano Bellingeri, group CEO and Josep Besica, group CFO.

Please go ahead, gentlemen.

Mastodiano Bellingeri, Group CEO, BFF Banking Group: Hi, everybody. Thanks for joining us today for the reporting of our first quarter results. And there are clearly more important events happening in Rome. Appreciate that you you are here with us this in our results. We are pleased to report a good start of the year in many in many respects with adjusted net profit of 35,000,000.

We shall manage our targets despite the higher rescheduling there on the factoring portfolio, which is where we use the as the further we’re we’ll be recovered in the following quarters. Assafting had a strong start of the year with profit before tax up 9% year over year on loan book, which has grown at 5% year over year. Italy is being back in a growth with double digit growth of 10% plus, and we report the highest level of volumes in the first quarter in history of our group. At the same time, because we didn’t collect as much in terms of NPI input to use in the first quarter, we continue to accumulate our balance sheet results. We had an increase of over 81,000,000 compared to June when we changed the accrual account.

The strength of the business continues also in terms of liquidity. We have 8,500,000,000.0 of deposits and then on the two deposit ratio of 68%. On the important issue of past due, we continue our work towards the stock of the due, which is down 5% from December. Importantly, we have 190,000,000, which is 15% of the stock of the deal in your period, which is expected then to come off the past due calculation over the next quarter. That’s more than double the level that we had a quarter a quarter ago.

We continue to contract the contagion invoices. They’re now down by additional 25,000,000 compared to the previous quarter, another 100,000,000 reduction since the recent switch. Capital, therefore, continues to increase. We had a CET1 ratio of 13.7%, which is above our target, but significantly is above the level we had before we reclassified the portfolio in June of last last I think for the things to notice now, our bond portfolio is one in a positive territory with an improvement of 70,000,000 here on here. We try to collect so that we can understand on the future profitability of that portfolio and we expect to gather launch our deposit gathering activities in Greece at the end of this of this quarter.

If you move to page four on the details of the balance sheet, we’re finalizing the the loan book is 5,800,000,000.0, which is, as I recognized for the first quarter, the bond portfolio continues to shrink following our strategy. And as I mentioned, we have a positive mark to market now of 12,500,000.0 compared to minus 67,000,000 of last year, seeing the dynamic on interest rates and the credit spread of Italy. Deposit continues to accrue transaction services, and therefore, we have managed outflows in our online deposits that we manage to as a buffer in terms of liquidity. We’re fully compliant with the my requirement, and you see the difference in our bond issued, which is a very important also on the interest net interest income of the of the group. The capital generation has been strong, as I mentioned, with 143 bps of capital generated in the last in the last quarter.

In terms of p and l, core revenues is just below February driven by 12,000,000 of rescheduling, which is for the revenue for the following quarters. We have a reduction in the cost of funding by over 20,000,000 despite 7,000,000 of cost for the brand issues, which we think is a positive indication also how flexible is our funding structure. And the the group PPT, we lost last year, but we’ve seen a good growth of the factoring in lending portfolio and transfer the lending profitability despite the lower rates of the the rescheduling impact as of. I leave the floor to Josep for the presentation and include the presentation. Thank you, Max.

I will now move to slide six where we show the key economic trends for the factoring and lending division. A few messages. First, gross interest income is down year on year. However, this may due to higher rescheduling, which are expected to be recorded throughout the year, and this is despite lower interest rates. Second, other income is stable year on year, and importantly includes 3,800,000.0 of recorded rights.

Third, and importantly, gross yield on average loans has decreased less than the API reference rate. With an overall rate down 1.45% versus the cost yield down 19. Obviously, cost of funding is down as well. Moving to the bottom part of the slide, total API and recovery funds are up 124,000,000 or 11% year on year. And off balance sheet funds, which are part of our deferred profitability are up 81,000,000 since June 24, a report step up of the accrual rate.

Moving now to slide seven on factoring lending loan book and volumes. The group loan book is up 5% year on year, and importantly, Italy loan book is up 10% year on year, reflecting higher volumes on which I will comment in a moment. Paying down, this reflects repayment due to cash injection by the government at the end of twenty twenty four. And finally, on loan, let me highlight France, which is starting to be material for the group with significant potential for further growth. Moving to volumes.

These are up 4% year on year and represent the highest first quarter ever for BFS. Italy is up 10% year on year, improving the trend already observed in the fourth quarter of last year. And Poland is also significantly up. I will now to slide eight on payments. The number of transactions continues to show a positive trend and is up 4% year on year with an increasing component of instant payment.

Revenues are likely to be down year on year even due to some flat fee metrics, while the policies are down mainly on lower check settlements. Important for us moving to security services on slide nine, a few relevant points. First, assets under deposits have now reached 75,000,000,000 and they’re up 21% year on year. And this is reached based commercial initiative. Second, global custody assets under custody are close to 130,000,000,000, and they’re up 9% year on year.

The positive trends are actually reflected in revenues, which are up 15% year on year. And importantly for our business model and for our growth, we have also recorded strong deposit growth to 3,800,000,000 or 28% year on year. Again, this reflects commercial initiatives and client asset allocation. I’d like to spend on our cost base. Cost discipline is confirmed with OpEx and G and A up only by 4%, mainly due to slight increase in G and A and ongoing investments in the business.

Looking at the value creation, factoring in the lending, OpEx in the area up 2% year on year, payments 3% year on year, mainly related to ICT cost and investment for growth, security services and corporate service and corporate standard where most of our investments are concentrated are up 6% year on year. Any valuable remuneration to be assigned only after the removal of Bank of Italy fund. Slide 11 on our balance sheet. We confirm that funding remains ample with a loan to deposit ratio of 68. And importantly for the future, there has been an increase of 70,000,000 of our mark to market on the x to collect portfolio.

Going a bit more in detail, funding costs are below average preference rates, which are a blend of the rider and driver. Since first quarter twenty four, we have issued 600,000,000 of MREL in each of securities and discovered all our MREL needs. We have no ECB funding to be refinanced. As Mark said, our ATC portfolio continues to go down in line with plans. And as it’s filed, let’s see, are both up since December with let’s see, are up 25 percentage points despite the growth of the loan book.

Slide 12 confirms the low risk profile of the company. The slide is full of numbers, so let me follow the key messages on the slide. A, NPEs are down to 1,800,000,000. This is driven by an ongoing reduction of the total past due. B, 95% of our NPE exposure is represented by public administration.

With NPS represented almost exclusively by municipalities in conservatorship. And following the communication already done in January 25 on ’1 specific case, we are underway further appeals to the European Court for Human Rights to obtain central obligation central government obligation to pay. The cost of risk stands at 4 point 2 per discount. Let’s just give a bit more of detail on past due. Companion invoices are down another 25,000,000 in the quarter.

There is nearly 25% reduction in the past due driven by collection, proving by the way the location of our portfolio. New debtors from bonus in past due is only 7,000,000 in the quarter with 74,000,000 of exposure to debtors in past due come back to bonus. So the new past due is really driven by campaign only. Or exposure in QP is more than doubled since QP. I will now move to slide 14 on capital generation.

Our CET1 is above pre credit reclassification level at 13.7. This is despite a 50% increase in RWA and 65% RWA. Generation in the quarter is 143 basis points, and total capital growth was up similarly to 16.7%. As I mentioned before, all MREL requirements effective from January 25 of quarters with Amplebara. Finally, you probably ask questions.

Anyways, the dividend policy is confirmed subject to the listing of the dividend bank by Bank of Italy. Let me turn now and back to to our group CEO for his final configuration. Thank you, Julius. This was a very clear presentation. We leave a if you take away the for this presentation on page 15.

We’re off to a good start this year, now with our expectations. Good momentum in the factor and lending business with double digit growth in Italy and with an increase in embedded profitability of the off balance sheet fund. We continue to take you with that in total past due in the contingent invoices. And the new past due are almost entirely driven by the contingent effect with a significant increase on the part of the portfolio in two periods, which in terms of also very positive for the consumer reduction of the past due increase efficiency of our RWA density. We translated a good core capital generation with a CET1, which is now fully restored at the level that we had before the certification of last year, and therefore, conditions as well for the future.

Thank you again for joining us today, and we welcome your questions, which we will answer now.

Conference Operator: Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone telephone. If you’re using a speakerphone, please pick up the handset before pressing the keys. The first question comes from Tomato Niedu of Kepler Cheuvreux.

Mastodiano Bellingeri, Group CEO, BFF Banking Group: I have a a couple of questions. The first one is on volumes. They were they were good numbers. Obviously, we were also comparing with the easy easy comps, but I wanted to focus on France. Where do we do you think we could see the reason in the next few years?

And, yeah, if you can give us some color from that. And then the second question is is on the huge period amount. Looking at the amount, it is much higher than in the last quarters. Theoretically, I understand that it has more as you are going to collect your contingent portfolio, the more past due should be reduced. But is there something more behind that?

And then can you give us more color on that as well? Thank you. Thank you. Thank you for the questions. Look, on volume, sir, I think, yes, we’re off to a good start.

France providing support in that top. It’s a very small market for us at the moment, but it’s a a company which has a attractive very high expenditure in goods and services with a portion of those expenditure which paid late. Importantly, a lot of our customers already work there. Now we have these results without even a physical presence in the country, and we are delivering the level we were expecting with a branch open there. So we think, actually, compared to our expectations, market can actually deliver quite a bit, particularly once we will have, you know, the ability to open the branch the branch there.

In terms of the of the past due, you correctly pointed out two three things, which also you guys highlighted before. First one is the past due to your period of 190,000,000. That’s a substantial increase compared to the ones we had in the previous in the previous quarter, which will then translate into a lower level of value going forward. But the second aspect I would like to highlight is on page 13, the second to last part, 11,000,000 of new past due generate in the quarter. That’s not the contagion involved.

There’s a total of new new data generating this quarter, which actually indicates confirmed the what we said always the math that we’ve actually structurally, our business model is unchanged on the front book. We’re actually dealing with the back book issue, which is getting solved steadily and should restore level of under the density, which is more in line with the real risk profile of the business. Thank you.

Conference Operator: The next question is from Manuela Meroni of Intesa Sanpaolo. Good good evening. Thank you for taking my questions. The first one is on the rescheduling in collection. I’m wondering if you can share with us the with us what are the reasons that the is a high rescheduling in collection that we have had in this quarter.

And if the starting point for the second quarter would be the level of NII plus this 12,000,000 in debt that was the rescheduling impact in the quarter. The second question is, again, on the past due trend. I think that it was a very good sign that your past due declined and this adjust €11,000,000 of new past due from debt to from bonus to to pursue. I’m wondering if you can you expect such a trend to continue also in the next quarter. And the last question is on the dividend ban.

I’m wondering if you have some information about the potential removal of the ban. Thank you.

Mastodiano Bellingeri, Group CEO, BFF Banking Group: On the dividend ban, we have we have no more to continue. We’ve got a good line of communication with quite reassuring, and also we have a good density, which we got over over the last quarter. In terms of past due trend, we continue to to operate towards the past due. We indicated that that a lot of the activities that were put in place in the last year takes a bit of time to play out. And so we expect, you for an acceleration proportion of the release of the past due over time.

Also, since you’re a mathematical reason, which is highlighted actually on page page 13. Because it is only 1% who have the assets in past due, actually, the reduction of the contingent involved is a disproportionate effect on those gets reviewed towards at the end of that 1%. And so, you know, we we’ve always said it’s not gonna be linear trajectory, and that’s why we expect that things improve even better in the in the following quarters. Yeah. But we we there’s really a lot of work on that respect.

There is a collection book. Remember, we we don’t control when the debt will pay us. Basically, there’s a fee and so depending on the charge they made in terms of paying certain invoices or not, We’ve invoiced as of which, I would expect the collection date, then we set a new collection date to keep the IR of the portfolio conference. And so you you can’t necessarily add that that amount of rescheduling to the next quarter, and it might take a few things now to to collect, but it’s a it’s an an amount to get recovered. And in a sense, keep the profitability of the business at a pretty good level.

Actually, we didn’t highlight it. So we did highlight, but but I think it is an important point, the fact that in terms of price, the the current interest rate is around is actually will improve the yield of the portfolio, and it’s not a reason. And so, you know, something was sort of lagging to the end. It provides a support for the target to the government to bank. Thank you.

Conference Operator: The next question is from Andrea Levy of Equita.

Josep Besica, Group CFO, BFF Banking Group: Thank you for taking my questions, sir. Good afternoon. The first one is related to the 2026 guidance that you provided in February that if you confirm it, you can confirm it or provide an update on that. And if you can provide some more color on the trajectory for this year. And in particular, I want to ask you on volume growth and loan growth that would adapt are showing the signs of recovery.

But in some way, we are still below with the original target in the plan. It was a growth, I remember, in terms of CAGR, if I remember well above 10%. So just to understand when do you expect in the current market environment to come back to that level? Or and or is this level is still a reasonable CAGR that we can meet over the next the next few quarters, next few years? Thank you.

Mastodiano Bellingeri, Group CEO, BFF Banking Group: In terms of guidance, frankly, we made a pretty clear statement. The performance is and we want to expect it in the four lines guidance that we’re doing. So we have not more than that to say. We we think that’s a good start, and we continue to deliver In terms of volumes and loan growth, remember, you’re you’re seeing a portfolio that shows that quickly.

You need to look at the long term trend and not the point a single point in time may not be necessarily the best representation. For us, what is important is that you are seeing strong growth in volumes across many geographies. We have a good pipeline. We have rejuvenated that, you know, drive the safety, think there are plenty of opportunities. Remember, it’s also the the team that has changed the leadership around that in the middle of the quarter.

So we think, because we’re looking at, in a sense, the the past, something which is already for six six weeks old, if you want, in terms of numbers, we expect to see positive results for for the organizational changes and the upgrade of the team we’re seeing. In the sorry. Banter, again, we confirm the value for the given in terms of growth.

Conference Operator: The next question is from Simoneza Kirioski of Mediobanca. Hello. Good evening. Couple of questions from my side. The first is on the trending volumes, so that was very strong in Italy, especially the NHS segment.

So the question is if there is, as I suppose, an impact of the large contracts that you have announced last year. Possible to give a color of how much comes from that large contract. On the contrary, the PA segment is not so brilliant. So if you could comment what is happening there and and also in Spain. And the second question on the scheduling, the impact, was negative above last year.

You didn’t provide this data previously. So if you could help us to understand LED’s dynamic. Thank you.

Mastodiano Bellingeri, Group CEO, BFF Banking Group: Yes. On public administration in Italy, I think it’s driven mostly by lower volumes that we’ve seen in around around utilities. In Spain, the volumes have been driven that has been driven mostly by a contract that we have lost, but with the contract which has a very low marginality with a relatively limited amount of API investment, and therefore, profitability for us was not very significant. So in terms of profitability, Spain is actually above budget for us. In terms of the rescheduling, yes, if we have given the details, we we thought we were changing the core rate, that number, and then bigger impact on the net over the call, better to provide you the split.

It seems clear, as I mentioned before, the question of Andrea to say that we had haven’t collected the final order in March, which we’re expecting to collect in this quarter and even happen. For us, take a very prudent approach to accounting. So we pay the same internal rate of return, assuming new collection date and take a provision on the revenue level, which is which gives us the IRR concept in the planning interest rate environment. Mean, that you are deferring this one more than proportional stability.

Conference Operator: Thank you. As a reminder, if you have a question, please press star then one on your telephone. The next question comes from Giovanni Razzoli of Deutsche Bank.

Mastodiano Bellingeri, Group CEO, BFF Banking Group: Good afternoon. Two very quick questions. The first one is you can share with us how much of the decrease in risk weighted assets is related to lower operational risk because it’s mentioned in the in the press release. And the second question, again, on rescheduling the the €12,000,000. So there has been a postponement in the in the payment schedule.

I was wondering what was driving this? Is this, you know, normally in your opinion? And what makes you confident that you can recover this in 02/2025 in the next couple of quarters? Thank you. Yes.

In terms of the recovery next couple of quarters, if you’re making another quarter, So, yeah, we’re keeping the appropriate and the cost of the new folks that we can help. We expect to collect those receivables in the in the following quarters. Can we please talk about the debt? Your voice is very noisy. Can you speak louder?

Because I struggle to understand. We were we were reshuffling some paper in front in front of the of the meeting. So thanks for letting me know. So what it what it said in terms of rescheduling, what we that that that amount is then spread out over the expected collection time of the invoice, which is usually a few months a few months later so that gets gets the that’s in the following quarter. And and therefore, it should go to the actual collection.

But if, for instance, we collect earlier than our expected collection time, then that amount will actually go through the p and l immediately. So that’s that’s how the mechanism the mechanism works. In terms of the impact on other deal, we need to reserve to answer. It’s around 40 bps reduction of the so the increase of common equity of one due to operational risk decrease. And it’s expected to remain constant over the next few quarters.

It’s also important in terms of of operational risk because remember the way you mentioned this call is very much linked to reported profitability. And and after 02/2025, we’ll lose, in a sense, 02/2022 where we had a one off effect of the accrual of the €40. And so even going forward, as you just mentioned, besides this year, we should actually have this benefit persisting over time, even with an increase in profitability.

Conference Operator: For any further questions, please press star then one on your touch tone telephone. This concludes our question and answer session. I would like to turn the conference back over to mister Belangeri and mister Sika for any closing remarks.

Mastodiano Bellingeri, Group CEO, BFF Banking Group: Thank you. Thanks for joining us tonight and for the for the questions. And we’re welcome. We’ll continue to talk to you in the future. Thank you very much.

Conference Operator: This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.