Approval of consolidated financial statements FY 2016 - BFF Group
- Net profit combined with Magellan1 at €88 million adjusted2 for €11 extraordinary costs
- ROTE combined with Magellan1 and adjusted2 at 37%
- Proposed dividend distribution of €72 million, 5% above 2015, thanks to high capital generation
- CET1 ratio at 16.7%3 , after dividend distribution and cash acquisition of Magellan
- Good asset quality: net NPLs/net loans at 0.5% including Magellan; cost of risk of 0.10% • Net Banking income combined1 and adjusted5 of €175 million, up by 24% y/y; cost/income ratio combined1 and adjusted6 at 32%
Milan, 8 February 2017 – The Board of Directors of Banca Farmafactoring (BFF), the specialist in management and non-recourse factoring of receivables towards the Public Administrations in Europe, approved the preliminary 2016 full year consolidated financial statements, which include Magellan for the first time, following its May 2016 acquisition. Magellan is the leading provider of financial services towards the healthcare sector and the Public Administration in Poland, and operates also in Slovakia and Czech Republic.
In 2016, the Group saw a +24% increase in net banking income1,2 , thanks to a solid business model, further funding optimisation, in addition to an efficient cost structure (cost/income ratio of 32%1,2) and low credit risk (cost of risk 0.10%).
“In 2016, we consolidated our competitive position as a pan-European player, integrating Magellan within the BFF Banking Group. Capital ratios remain high, even after the cash acquisition of Magellan and the dividend proposal, combined with credit risk close to zero. These factors, together with the visibility of future revenues and synergies yet to be realised, allow us to look to the future positively,” - commented Massimiliano Belingheri, CEO of BFF.
Key consolidated financial statement items (BFF and Magellan combined):
Please note that the balance sheet figures at 31/12/2016 reflect the consolidation of 100% of Magellan within the group. The stated income statement figures include Magellan’s contribution starting from June 1, when the acquisition was completed, whereas the combined data include Magellan’s results starting from 1/1/2016.
Customer loans at the end of 2016 amounted to €2,499 million, compared to the previous year’s €1,962 million (excluding Magellan), and up by 8% versus 30/06/2016 including Magellan. Italy remains the main market for the group with 75% of total loans (89% at the end of 2015)., with foreign markets (Spain, Portugal and CEE) accounting for a quarter of the loans Magellan’s loans reached €447 million, 8% higher than year-end 2015 and accounting for 18% of total Group loans.
In 2016, the Group has continued its funding diversification. Total funding reached €3,152 million at year-end. Online deposits reached €817 million at 31 December 2016 (+95% compared to €418 million at end 2015). A €150 million bond was issued in June 2016, maturing in June 2021.
The average cost of funding shows a further reduction compared to the previous year: the combined figure including Magellan fell from 2.6% in 2015 to 2.1% in the second half of 20164 , including the cost of financing of the Magellan acquisition in PLN. In 2016 the Group started to refinance Magellan’s balance sheet, a process which will continue in 2017, bringing significant synergies.
Combined1 and adjusted5 net banking income amounts to €175 million in 2016, up 24% compared to the €142 million figure for BFF without Magellan in 2015. Even after the acquisition of Magellan, the operational structure remains highly efficient despite the investments made in 2016, with a combined1 and adjusted6 cost/income ratio excluding extraordinary costs of 32% compared to 30% in 2015. The greater incidence of costs is mainly connected with the increase in personnel costs - 409 employees at Group level at end 2016 (of which 225 for BFF only) compared to 188 at end 2015 for BFF only– and higher accruals relating to the incentive system due to above-budget results, together with higher administrative costs to support business growth and the Group structure.
Net profit combined with Magellan1 and adjusted2 amounts to €88million, excluding non-recurring costs of €11 million after tax, due to the extraordinary contribution to the Resolution Fund (€1.5 million net), preparation costs for a possible listing7 (€2.4 million net) and the acquisition of Magellan (€7.6 million net).
Net profit combined1 and adjusted2 has risen sharply (+22%) compared to the €72 million adjusted net profit for 2015 (which excluded Magellan). The 2016 stated net profit (which includes Magellan only from June 1) amounts to €72million.
In 2016, Magellan reports a €9.6 million net profit adjusted for extraordinary costs, representing 11% of the combined1 and adjusted2 net profit for the Group.
ROTE combined with Magellan1 and adjusted2 reaches 37% in 2016, from 28% in 2015 excluding Magellan, thus confirming that the international expansion strategy has contributed to improving the Group’s already high profitability.
In line with the Group dividend policy, the Board proposed a dividend distribution of €72 million, equal to the consolidated reported net profit and equivalent to a 100% pay-out ratio to reported income.
The Group maintains high capital ratios even after the cash acquisition of Magellan and the €72 million dividend distribution proposal, with a 16.7% CET1 ratio and a 16.7% Total Capital ratio calculated on the Banking Group perimeter (pursuant to former TUB – Testo Unico Bancario). Considering the CRR Group perimeter, including the parent company BFF Luxembourg, the CET1 Ratio is 16.4% and the Total Capital ratio 16.6%.
The Group confirms a superior asset quality, with a net non-performing loans/net loans at 0.5% at end of 2016, slightly higher than the 0.13% in 2015 due to Magellan’s entry into the Group and expansion in the purchase of loans to the Italian local authorities segment.
Significant events since the end of 2016
On January 13, 2017, the rating agency DBRS – the Group ECAI – reduced the rating of the Italian Republic to BBB (high) with stable outlook. The Group estimates that this will have a negative impact on its capital ratios of approximately 360 basis points proforma on 31/12/2016 with effects starting from 31/3/2017.
The Group plans to counter this with internally generated capital and other measures. The Group is currently awaiting the communication from Bank of Italy of its 2016 SREP capital ratios.
Please also note that the merger of Mediona spółka z ograniczoną odpowiedzialnością with Magellan S.A., closed on December 16, 2016, may give rise to a tax benefit for the latter, which could be included in the financial statements of the Group should the Polish tax authorities approve the request.